Investing in Bitcoin and being Bitcoin-centric are different. This may seem like a semantic argument, but in reality, the behaviors and mindsets of these two groups are completely different. In this article, I will explain the meaning of “Bitcoin Standard”.
Bitcoin Investors
Bitcoin investors are those who seek returns in dollars (or other fiat currencies, but for simplicity, let’s stick with dollars). Their base currency is the dollar, and that is how they measure wealth. This is understandable because they have been conditioned to think this way, but this mindset is manipulated from the start.
First, it is difficult to measure how much your assets have appreciated. If you strictly calculate in dollars, you may have gained a certain percentage of returns (let’s say 30%), but over what period of time? If it’s assets like real estate, it could be 10 years or 10 months. Obviously, 10 months is better, but how much of that value is real? Can you buy as much with the returns as you initially invested?
Inflation
Because inflation has to be taken into account. Investing in dollar-denominated assets means you have to consider inflation. If your investment has gone up 30% while inflation is at 30%, you haven’t actually gained any returns. In fact, due to capital gains taxes, you may have lost value.
Another issue is what standard to use to measure inflation. Many investors use dollars tied to the Consumer Price Index (CPI) to measure their returns. But this is flawed because the CPI is a manipulated indicator. The Bureau of Labor Statistics in the US almost arbitrarily adjusts the CPI through hedonic adjustments, making it lower than the actual prices. So if your investment only keeps up with the CPI, you have likely lost purchasing power. It’s not a good measure.
Monetary Expansion
The classic definition of inflation is monetary expansion, and M2 money supply is a commonly used indicator to measure monetary expansion. In 1959, the US M2 was $287 billion and is projected to reach $19.4 trillion by 2021 (more on this later), with an annual growth rate of about 7%. If you use this indicator, most investments look very bad. You are likely losing because even achieving a consistent 7% return every year is difficult. Financial advisors use this 7% number to measure themselves, and most people don’t meet that standard. So if your investment keeps up with the pace of M2 money expansion, you are just maintaining the growth rate of the numerator and denominator. Also, due to the existence of capital gains taxes, you may lose in terms of the percentage of money supply.
However, even the statistics are not ideal. The Federal Reserve stopped calculating M2 in 2021 and introduced something called M2SL, which is likely to introduce more false factors that they can manipulate for this indicator. Why do they do this? Because investors started using M2 to measure their returns. Especially during the pandemic, M2 has been rising so fast that most investments calculated by M2 show no returns. So now we have their modified measure of money supply called M2SL. The measurement of M2 has various issues, and overall statistics are notoriously unreliable. So even for investors, this demanding measure can be manipulated to make their returns look better.
Bitcoin Standard
What’s left then? You can measure your investment in terms of gold, cows, custom-made suits, or even a Big Mac. These are useful methods to see how much purchasing power you have relative to the past, but they all have flaws. They are lagging indicators and relatively easy to manipulate.
For “red-pilled” investors, Bitcoin is the true standard for measuring wealth because it is the hardest to manipulate. When you accept this, it is when you adopt the Bitcoin Standard. In other words, Bitcoin becomes the measure of your investment returns, not the dollar, not CPI-adjusted dollars, or dollars based on the M2 index.
Conclusion
There are undoubtedly many Bitcoin investors now. Many people own Bitcoin through exchanges, ETFs, and even apps like Robinhood, Venmo, and CashApp. But this is different from being Bitcoin-centric. The most likely long-term holders of Bitcoin are the ones who are Bitcoin-centric.
I myself know that I had a mindset shift after reading Saifedean’s book, “The Bitcoin Standard.” Since then, I have had a completely different perspective on money, seeing the dollar as a depreciating asset. My measure has changed. In economics, we call this function of money the unit of account.
This has made me feel very free because I don’t have to worry about my investments, mainly because I don’t have many. I use the Bitcoin Standard, and I store my value in my unit of account. We have become accustomed to being robbed through the fiat currency system, and we have learned to tolerate depreciation. Depreciation is a continuous and endless burden.
The Bitcoin Standard frees us from this burden of investment. It is also the ultimate state of money in game theory. The hardest money wins. You can switch now, or you can switch later.
(Note: The article is from the public WeChat account “Liu Jiaolian”. The content of this article does not constitute any investment advice. Cryptocurrencies are highly risky and carry the risk of going to zero. Please participate with caution and take responsibility for yourself.)
