What makes Bitcoin the money of freedom and future

By Zain Jaffer

The price action and volatility of Bitcoin and other major cryptos is a hurdle many non-holders may still need to overcome. In the stock market, swings of plus or minus five percent will already induce anxiety attacks in some investors. However, large swings are par for the course in the Bitcoin and crypto markets. Many outsiders and journalists are baffled by what investors and believers see in Bitcoin. 

What many outsiders don’t see is that Bitcoin is freedom money. Money is defined by three characteristics: a medium of exchange, a store of value, and a unit of account.

Many people confuse fiat currencies like the US dollar with money. The two are not necessarily the same. Fiat means “by decree.” After US President Richard Nixon ended the practice of backing US dollars with gold in 1971, the US government effectively converted the dollar into a fiat currency because they declared that holders worldwide should honor it as a promise by the US government. The term “backed by the full faith and credit of the US government” is a common phrase associated with it and the treasury bills and bonds it sells to lenders.

To lend credence to the US dollar, its use as a petrodollar for the pricing and trade of oil was started in 1974  driven primarily by security guarantees for the Middle East. This has helped prop up the US dollar, as well as US treasuries since a lot of these dollars are lent back to the US through bills and bonds.

Recently, however, Saudi Arabia said they would no longer renew this exclusivity promise, and now allow other currencies such as the Chinese Yuan to purchase crude oil. This follows a new trend where non-US-aligned countries in the BRICS (Brazil, Russia, India, China, Saudi Arabia) are trying not to be too constrained by US government policies. These governments oppose the ability of the US to simply cut off countries like Russia from their foreign accounts in US dollars. 

In addition, overspending in the US Congress has made the national debt exceed $35T as of mid-August 2024, resulting in a debt-to-GDP ratio of roughly 123 percent. Basically, US spending and debt have outrun its GDP of goods and services and collected taxes.

Governments abroad fear that the US is simply printing more money and issuing more treasury debt. At some point, some are thinking the US may end up defaulting with too much debt and too much fiat currency in the system.

We are probably far removed from that fear, but excess printing of currency, particularly during the pandemic CARES Act and post-recovery efforts plus financing the war abroad in Ukraine, energy increases, and supply chain issues, have resulted in inflation.

Some may ask, why not gold? Gold has a utility as a desirable asset of beauty for jewelry, as well as a store of value. However the price action has not been that impressive over the past few years, and its transferability in the Internet age is not good. Try walking through airport security with one million dollars worth of gold, or mail it to someone halfway around the world. It’s just not workable. Plus when the price of gold increases, miners dig up more from the ground, thus further increasing the supply in the same way the Treasury prints more currency or creates more money.

Going back to Bitcoin, many non-holders don’t realize that not holding any fixed or limited supply asset — meaning those that cannot be inflated — is, in itself, a risk. They think the risk is in the daily volatility even if the long-term adoption and price trend is upward. They fail to realize that as a store of value, the US dollar is losing value over time due to inflation caused by overprinting and spending beyond GDP and tax collections. Gen Zs are also more comfortable with digital assets like Bitcoin and crypto and feel that gold is their parents and grandparents' asset of choice, not theirs.

What we need is reeducation about what money really is, and what it is not. Bitcoin is a modern form of money that fulfills all three requirements and it is the money of the future.

Author Bio

Zain Jaffer is an accomplished entrepreneur and investor, actively involved in a range of investments including real estate, technology start-ups, private equity, and digital assets through his family office, Zain Ventures. He also supports underrepresented causes and underserved communities through the Zain Jaffer Foundation.