Bitcoin is a category-defying concept. It isn't quite in the same class as gold, it's not really a currency, yet it's not the same as company stock either. Paradoxically, however, it exhibits characteristics of all three of these investment vehicles. Bitcoin is so new and so revolutionary, it eludes the confines of conventional economic classification. Attempts to define Bitcoin in current terminology are destined to fail.
On the face of it, this inability to place Bitcoin in its rightful pigeonhole might be assumed to be a trivial matter. However, it actually testifies to a more comprehensive issue, namely that of Bitcoin's role in the world in general and in the financial world, in particular. Everyone has heard of Bitcoin, yet nobody really knows where it will be going? Is Bitcoin really going to be the next major disruptor? Or will it fizzle to yet another roadkill on the long highway of technical innovation?
Given Bitcoin's relentless rise and ever-burgeoning value, it appears that it may well take the first track, i.e. the way to serious disruption. The fact that established financial players like banks, clearing houses and other financial incumbents are none too pleased with Bitcoin's rising star, provides both neutral observers and Bitcoin proponents, alike, with plenty of confirmation that Bitcoin may be on to something.
Enabled by technological innovations that promise ever-greater efficiency and lower cost, Bitcoin seems to be appealing to the growing group of disgruntled banking customers, especially, who are continuing to be dissatisfied with the lack of adequate service provided by existing financial institutions, both public and private, as well as the wholesale fraud and over-charging rampant in today's banking realm.
This narrative has not only resulted in an erosion of trust, but - more critically - has also fanned a more general sense of marginalization and alienation amongst certain segments of the population, in particular millennials and sophisticated investment professionals with an independent streak.
One of the main reasons Bitcoin has been gaining traction the way it has is that Bitcoin goes beyond the limited products offered by current players. In fact, Bitcoin includes the full trifecta of 1) a peer-to-peer medium of exchange 2) a store of wealth, and 3) a vehicle for non-beta investments.
Best of all, Bitcoin offers each of these with greater levels of control, and at lower overheads to boot!
Take payments. Bitcoin has attracted a lot of attention as a faster, cheaper and arguably safer method of making payments and transfers than conventional bank transfers, or by using remittance companies like Western Union, or credit cards, or even PayPal. Not to mention the fact that Bitcoin transactions take mere seconds, as opposed to the 5-10 (working) days that some of the afore-mentioned parties take to complete a transfer.
Store of wealth? Given that Bitcoin is actually limited to ever only have a circulation of 21 million units, there is no other store of value out there as inflation-proof as Bitcoin. Bitcoin will always be finite to the point of being precious, even when the ceiling of 21 million is reached, which will only be in the year 2140!
Bitcoin has been the safe haven of choice for a growing number of next-generation investors. These often 20 or 30-somethings are savvy to the new tech-oriented assets available out there and are aware that there's still immense upside to fintech in general and Bitcoin specifically.
Above items are trillion-dollar opportunities. This is why it's safe to say that at some time in the future, one of these potential uses, or possibly an entirely new one, will become Bitcoin's killer app.
Now, granted, it will take time for Bitcoin to develop the depth and stability of a dedicated user base that its potential now promises. In addition, it will also take time for governments and other monetary authorities to understand the full array of costs and benefits of the Bitcoin platform, and to subsequently arrive at a consistent regulatory and supervisory framework.
But one thing's for certain, even with this rite of passage in mind, clearly, Bitcoin is not going away again. On the contrary; the Bitcoin genie is out of the bottle. What's more, in view of Singapore's oft-declared Smart Nation initiatives, Bitcoin is very likely to play an ever-increasing part in society in Singapore and the rest of the world, without doubt ultimately claiming and eventually taking its undisputed place alongside fiat money.
DISCLAIMER
I am not an investment advisor and above article is for purely informational purposes and is not to be taken as investment advice. Investors are advised to personally undertake adequate due diligence, or to consult a financial advisor in order to determine what assets - if any - are appropriate to invest in.
