Continuing from yesterday's post, let's talk about an even more misunderstood asset: the cryptocurrency.
What precisely are you buying with a cryptocurrency?
You're not buying an asset so much as an option on a decentralized future.
Bitcoin is not an inherently useful asset. It doesn't return a dividend, doesn't meaningful do any productive work. It kind of just sits there.
That's because Bitcoin is a permission-less asset that cannot be inflated away. Nobody can tell you what to do with it.
If you've lived in the first world, this may seem strange as a requirement. But if you've lived elsewhere, you'll know that high inflation and taking the money in your account can happen. Bitcoin's qualities are quite important.
For those in the first world, buying Bitcoin is buying an option that the world will look more decentralized in the future as opposed to centralized. It's an option that in a decentralized world, you'll need a different currency than what you have now.
Consider that Bitcoin, along with Ethereum, is used as an on-ramp for speculating in cryptocurrencies. You can easily get those two on any exchange in US dollars. Most smaller crypto will be bought using those two. Hence, it is qualitatively an option.
Bitcoin also behaves like an option. You buy it because it will go up 20x. You don't buy it because it will return 10%. The volatility and risk would not be worth it.