The Monetary Revolution

In today’s Exponential Investor…

  • Back to the time machine
  • Decoupling from the old world
  • The one key takeaway from it all

Yesterday I published something old. Seven years, seven months and eleven days old to be precise.

It was the first instalment of one of my earliest published pieces on bitcoin.

It wasn’t hid behind a paywall, it wasn’t from a subscription service. It was freely published in a free e-letter, known at the time as The Daily Reckoning Australia, to those who wanted a different perspective on how the world was moving.

In it, I set the scene for what I envisaged bitcoin and cryptocurrency could be.

Today, is the second instalment to that essay.

I’m bringing up this ‘relic’ from another time because, well, frankly, when I look at the ‘traditional’ financial system today, not much has really changed.

The situation the world finds itself in, thanks to rampant and loose modern monetary theory (MMT) from central banks and governments, is disturbing.

Thankfully now bitcoin and the wider crypto ecosystem is far more mature, robust and legitimised than ever before.

What that means is finally those from the ‘traditional’ system are waking up to the potential these crypto networks really hold.

But it’s not something that’s just happened overnight. It’s been a decade in the making. That’s why I’m bringing you the second instalment to my seven year, seven month, eleven day old, bitcoin and crypto essay.

To show you the core reason for the existence of crypto hasn’t changed, and that when you’re looking for something that’s truly reshaping the world as we know it, you can’t ignore just what this world has to offer.

Read on, soak in the information and start to appreciate just how big an opportunity this ‘crypto thing’ really is…

It’s not about Bitcoins, it’s about a monetary revolution

So this leads me to where technology is taking us when it comes to monetary systems. I wrote in last week’s Daily Reckoning about how our digital world is being driven by algorithms. And that this was in part because of our desire for more information and faster information.

Because of this demand for faster information, we also demand speed in financial transactions. Terms and acronyms like Netbank, EFT, BPay, PayPal, NFC and Bitcoins are part of our day to day vocabulary. All of these are faster and alternative ways of processing money. They’re all digital and they’re all driven by complex algorithms that make up electronic financial systems.

And over the last couple of years a legitimate currency alternative has come to the fore. The beginning of a monetary revolution. And if you haven’t heard of Bitcoins by now, you’ve been living under a Sony BetaMax or a Toshiba HDD Player.

Let’s for a moment sweep aside the insane price movements of Bitcoin which has seen the value of one coin peak on Wednesday at $266USD and plummet to an intraday low of $105USD.

Ed note: I know, right. Bitcoin at an ‘insane’ price of $266 and $105!

The technical explanation of Bitcoins deserves about 10 articles worth of information. And I’ve been following them since late 2009 when the price was $0.05USD, so I’ve seen the ups and downs and get how they work.

Bitcoins at their esoteric heart are a (kind of) decentralized digital currency. To be more technically correct they are a crypto-currency (a currency created and based on cryptography). They’re not controlled or regulated by a centralised financial system, or government. They are controlled by a community, its users, and transactions (although visible) shrouded in a veil of anonymity.

This in part, is the reason for its recent price movements. And when you look through the hype and hysteria surrounding Bitcoins at the moment, you can see an underlying social need. The need for an alternative solution to the current financial system we all have to deal with.

Do you think Bitcoins would have seen so much activity if the world had been in financial harmony? I doubt it. I doubt they’d be $266 a coin, and more like $7.

The current hype surrounding Bitcoins started when the Cypriot government decided they were going to steal money from bank deposit holders. This sent the price of Bitcoins through the roof as fear grasped Southern European states and the world realised no one’s money is really safe.

Because if you were a Cypriot and had held Bitcoins there’s no way any government or bank could have taken or stolen your Bitcoins. And even if they wanted to, they wouldn’t know which Cypriots had them because it’s anonymous.

You see the underlying hope that people have is Bitcoins might just be the alternative non-government financial solution the world has needed particularly over the last five years.

And I see a future where a crypto-currency (likely Bitcoins) will be the primary global currency. Others will exist and sit alongside Bitcoins. Already there’s a RuCoin which is a Russian evolution of Bitcoin, Terracoin and LiteCoin. All are various crypto-currencies which are used, stored, traded like normal currency. Bitcoin is just the first.

But the current problem which will hamper the progress of these crypto-currencies is instability. It’s difficult to go and buy a pair of shoes with bitcoins when literally 2 minutes later you might have been able to buy two pairs.

No one seems to be able to figure out exactly what one Bitcoin might actually be worth. And volatility like this is due in part to the volatility in paper money as no one knows whether 5 cents is an appropriate value for a Bitcoin or $200.

For a crypto-currency to thrive, it needs to detach itself from being linked with a cross paper currency altogether. If Bitcoins were only exchangeable with Terracoins, we might actually have a legitimate currency system. It would weed out speculators and possibly enable some stability in the crypto-currency markets.

If I’m right and crypto-currencies are afforded the attention they deserve as a potential alternative monetary system then we might actually start to de-couple from the insanity of the current global financial mess.

What it will take is greater stability and wider acceptance across the supply chain. If everyone from manufacturers to consumers accepts crypto-currency as a viable payment method, then we’re off and running.

And that’s why crypto-currencies are shaking up global financial systems at the moment. Businesses are slowly but surely accepting it as a method of payment, and it will continue to snowball from there. Already there are hundreds if not thousands of businesses accepting Bitcoin, Litecoins, Terracoins and RuCoins as payment.

It will only take one big global corporation, like Walmart, Apple or Virgin to accept one of them for us to have the start of a whole new financial system.

That ‘acceptance’ is well underway. It’s part of why the likes of Square and PayPal (both payment networks) have been proactively moving into the crypto space.

Also you must appreciate the speed at which this change is taking place.

Sure, it’s now 11 years since bitcoin started, soon to be 12 years. But the bulk of the heavy lifting in the development of the crypto space has really come about in the last three or four years. In that sense everything is still so new, so early that people still haven’t truly grasped how big a revolution is underway.

That’s the key thing here. That’s what you should take away from this. You’re witnessing a true monetary revolution taking place.

These sorts of world-changing events rarely happen. Let alone being witness to it and having the opportunity to get involved and potentially profit from it.

You can’t ignore the significance of what’s happening. And in my view you’d be incredibly short sighted to dismiss or ignore it. It’s not something you should necessarily go ‘all in’ with either. But I think that every investor should at least have some exposure to crypto and the revolution taking place.

Those who don’t, I believe will come to (further) regret it.


Sam Volkering
Editor, Exponential Investor

PS I know that the last two days have been about a monetary revolution unwinding right in front of our eyes. But I should also mention that building wealth isn’t the sole domain of crypto. In fact I strongly believe there’s loads of money to be made in the stockmarket. What’s great about the stockmarket is there are so many ways you can potentially profit from it. One of the most fascinating ways I’ve seen, is utilising the ‘Power Hour’ to pin point potential trades during an ultra-specific time of the day. You have to see it to believe it, particularly when the guy that can show you how is called, ‘Moose’. That alone is worth clicking here to find out more about it!

Category: Cryptocurrency

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