Why do I think Bitcoin will dramatically outperform gold over the next decade?
I stumbled upon this idea recently that makes a strong case for Bitcoin’s outperformance. I’m not saying this will happen for sure, but if you understand this idea in today’s environment, it makes sense that Bitcoin has more upside.
I call this idea the “trust discount”.
When you think about change in the world today, it’s happening faster than ever. And with that change, the way that people use money will change. Why? Because we are going into uncharted territory when it comes to how money is divided and allocated.
Central banks are taking more money out of people’s bank accounts than ever before. When they double the money supply, they cut your savings and your income in half.
People can only handle so much before they break. And the financial system can only handle so many people breaking at once before the system itself breaks. Right now, I believe we are headed full speed ahead towards the systemic failure of money.
What does the future of money look like?
Countries all over the world are losing the trust of their citizens. It’s common knowledge today that fiat money is backed by nothing, and the consequences of poor monetary policy are already being felt by countries like Argentina, Venezuela, and Lebanon. More countries will follow.
When these currencies fail, nations will be forced to back their printing by some sort of hard financial asset. Many choose gold for this role today, but soon they may opt for Bitcoin instead.
Why might countries prefer Bitcoin over gold?
If a country holds its reserve in gold, there’s no way for the people of that country to know if the central bank actually has what they claim they have. In short, the people must trust their leaders.
The problem is that it’s possible to fool people into thinking you have more gold than you do.
In a time where trust is at an all-time low, since crisis is at an all-time high, people need to know that their central authorities are telling the truth.
So if you think of gold as a reserve that can be used to coordinate between citizens and central authorities, the value of that gold must be discounted. In other words, people will pay a premium for a currency that is trustless.
And is there some asset that is king of trustless assets? Yes, it’s Bitcoin.