Is bitcoin an INVESTMENT or is it a CURRENCY? Or is it BOTH?

Is Bitcoin an investment or is it a currency or is it both? Let's talk about it. The truth is it's both. But it's very important to understand why it's both and how it's both and how it could be both simultaneously. Okay. The bottom line is currencies are an investment if they are in an in the early stages of adoption. So when uh well let me back all the way up. Money is typically described as having three uh properties uh or three uses as a store of value, as a medium of exchange, and as a unit of account. First of all, for now, we're going to dismiss the last one because it always happens last and it's always way down the line, which is unit of account means how products are priced and the means by which companies and individuals keep their books. It means like you know the profit and loss on a company's balance sheet whether that is denominated in bitcoin or US dollars. So in the process of adopting a new currency it doesn't matter whether you're going from sea shells to gold beads or you're going gold gold beads to gold or you're going you know to wamp them. Anytime you are transitioning to a new currency it goes through three stages. First is store of value which is an investment uh or can be an investment I should say. Next is medium of exchange and next is unit of account and it always happens in that order. And if you don't understand that order it's hard to understand why bitcoin is both a currency and an investment or in the reverse order I should say why it's both an investment and a currency because the investment part comes first. So when something is being monetized initially what happens is people realize that whatever it is has ideal monetary properties. For example, prior to the invention of the telegraph and subsequently the internet, gold had ideal monetary properties. Gold was as good as it gets in a non-digital world. Again, the what what broke gold was the invention of the telegraph because the because gold could not traverse a wire across the Atlantic or Pacific Ocean, for example. So prior to the invention of the telegraph and a digital economy, gold worked as money. Subsequently, it stopped working with the invention of digital communications. But it it worked because it was divisible, it was durable, it was portable, it was fungeible, and it was scarce, which are the five most common attributes of a good money. Now, other attributes typically have to include authenticatable, and there are a few others. You can you can go look at Fidelity's report uh Bitcoin first revisited uh to look through all of the properties of a good money. They have a nice chart that lists uh seven or eight total properties which is these are the properties of a good money and then it compares each of those properties uh with gold, Bitcoin and fiat currencies which are government madeup currencies like the US dollar that are not linked to anything and not backed by anything which is called fiat. Okay. So when a new currency whether it's gold or let's use gold before we talk about bitcoin. So when gold first became used as money first people realized it was scarce it was divisible. It was durable. It was portable fungeible which meant people started trading things for it. Um but initial initially people used it as a store of value. Meaning they tried to store wealth in gold because you can't use something as a medium of exchange until it is valued as a store of value. And the reason for that is nobody will accept something as payment if they don't value it first. So you never have a money that is a medium of exchange prior to being a store of value because if it is not a store of value nobody will ac accept it as you know as currency in an exchange. So store of value always comes first in the adoption of a new money. So people are using it as a store of value uh as opposed to real estate or whatever else. Previous to gold people were using a bunch of different things as a store of value. Um and in the very early days as a store of value they were using things like glass beads and wampam and uh sea shells and things like that. Okay. So people start realizing that something whether gold or bitcoin or whatever has ideal monetary properties for its time. You know gold for the analog world before the invention of electronic communications like the telegraph in the 1800s. Prior to that it was gold. After that the world has been looking for a better uh form of money and ultimately Bitcoin is that better form of money. So people start using it as a store of value. Ultimately enough people are using it as a store of value that people want to transact with it because the the recipient wants it. Now remember, it cannot be used as a medium of exchange prior to being a store of value because the person on the other side of the transaction will not accept it because they don't value it. They do not perceive it to be a store of value. And if they do not perceive the currency to store value as well, then they're not going to accept it in payment. So after a new currency whether Bitcoin or gold or sea shells or wampam or glass beads or whatever after it is a store of value it starts to become used as a medium of exchange. Now, Bitcoin is still very early in that process uh because it is primarily used by most people as a store of value. And because it is early in the adoption cycle as a currency, it is a fantastic store of value because less than 5% of the world is storing their value in Bitcoin. And the total amount of value that is stored in Bitcoin as compared to stocks and bonds and real estate and precious metals and fine art and all of that is about 0.2. 2% 1/5 of 1% of the world's wealth is stored in Bitcoin. The total world wealth, if you add up everything that people own that has value, uh it's about 1,000 trillion. Uh so 1,000 trillion, gold is only worth about 2 trillion out of 1,000 trillion. So two 10,000 is 1500th, which is 1/5if of 1%. So one 1/5if of 1% of all of the world's value is currently stored in Bitcoin. In the future, I believe it will be a much much larger percentage point. For example, if we go from 02% to 2% of the world's value is stored in Bitcoin, then the the uh price of Bitcoin goes up by a factor of 10, meaning each Bitcoin is worth more than a million dollars and the total amount of world value that is stored in Bitcoin is still only 2%. So there's a huge amount of headroom there. So what makes a store of value also an investment is when it's early in the adoption cycle because early in the adoption cycle there's a huge amount of price appreciation that will happen as more of the world adopts whatever it is. So similar to if you think about it as a share of Amazon stock represents the profits of e-commerce. Obviously, it was not clear in the early days that Amazon was definitely going to win that market. Clearly, by now they have. So, if one share of Amazon, assuming the shares were finite and not, you know, Amazon did not have the ability to make more of them, then one share of Amazon effectively was ultimately going to represent uh one share of e-commerce profits because Amazon basically owns that market, at least in the United States. So what's going to happen to the value of that share between 1995 and 2025? Over the course of 30 years, that value is going to radically increase because the number of people that are buying things online as a percentage of the total world population radically increased. And of course, on top of that, the world population itself is increasing. So if you have the ability to buy a share of Amazon, it is a great investment because it's going to radically increase in value as adoption of e-commerce results in Amazon being much more uh uh much more valuable as a company. Well, the same thing is happening in the early adoption of Bitcoin where if you are early in the adoption of a new currency, you have the ability to buy that currency with the old currency at a price that is significantly less than it will one day be. So, a lot of people would say that the price of Bitcoin as measured in US dollars, assuming the US dollars don't just completely implode and become worthless, is somewhere between 1 million and $10 million per Bitcoin, which means there's roughly somewhere between a 10x and a 100x upside potential in Bitcoin right now. Well, why is that there? Well, that is there because only 5% of the world's population owns any Bitcoin. And when you look at the total amount of wealth that that uh of the world's wealth that is stored in Bitcoin, it's not 5%, it's 0.2%. Meaning even the people who have wealth in Bitcoin, it represents a very small percentage of their wealth. Now in in my case, those two numbers are the same. If you say what percent of Joel Bombgar's wealth, what percent is Joel Bombgar's wealth of the entire world economy wealth? then it's one number a very very small number but it's a number if you say okay but what percent is Joel's Bitcoin uh of as compared to world wealth it's the same number because I have 100% of my assets in Bitcoin but the vast majority of people that's not the case for the vast majority of people even the 5% that own Bitcoin Bitcoin they maybe own $50 or $200 or some small amount that represents a very small percent of their total wealth so the total amount of adoption that's potential that is potentially there with Bitcoin is radically more than the current price. Okay, so when you add all of that up, Bitcoin is both an investment and a currency in the early stages of a currency adoption. It is an investment because there's a huge amount of upside as the rest of the world adopts the currency. At some point, Bitcoin will cease being an investment and will only be a currency, but that's probably 50 years in the future. I don't know. We're talking, you know, 2075. I mean, we're way out in the future before 100% of the world owns Bitcoin all the time and it's the only currency anybody really wants. Uh, that day is coming, but it is multiple decades into the future at a minimum because humans just take a long time, right? I mean, it takes a long time. It took multiple decades for the internet to be adopted. You know, the internet was invented in 1969, depending on who you ask. Um, you know, there's different different measures. I I can't remember if it was 69 or I can't remember there. There's all different uh measurements of when the internet was invented. Um but anyway, regardless, I I think most people would say, okay, worldwide internet adoption has taken, you know, 50 years. Pick a number. Well, I think the same is true of Bitcoin. There's no reason that the adoption of Bitcoin is going to be necessarily radically faster than the adoption of the of the internet. Um now it might be faster than the adoption of the internet but it's not going to be overnight and it's not going to be tomorrow. So as a result of that uh we are in this adoption phase where for the next number of years at a minimum there will be big potential upsides by owning Bitcoin by being an early adopter. Now for people who like early adopting technologies like me it is both an investment and a currency. Meaning in addition to being 100% of my liquid assets that I own or control in Bitcoin, I also use it for all of my spending. And once you have 100% of your assets in something, you have to use that for spending because that's all you have. All of the US dollars that I would have used uh for spending have already been converted the moment I got them into Bitcoin. Meaning I have to spend Bitcoin because that's all I have. So if you are early in the adoption cycle of a new currency, there is a huge economic upside. Eventually when the whole world has adopted Bitcoin, it will still grow at a rate of about 3% per year. And the reason for that 3% per year growth is because that is the rate of human productivity growth. Meaning every year we get between or around 3% better at making stuff. Now, some things like fat flat screen TVs, we get way better really fast. Other things like digging precious metals out of the ground, we don't get nearly 3% more effective at per year. Uh, you know, the tools and technologies for a lot of industries are much more mature than the tools and technologies for making flat screen TVs. So, the price of flat screen TVs comes way down, way faster than 3%. But on average for everything that humans make, it's roughly 3% per year. So even after full worldwide adoption of Bitcoin, the price will still continue to go up as measured in other things like other currencies by 3% per year because uh the bitcoin will will be fixed in supply and the total amount of stuff in the world that could be bought with it uh will be going up by 3%. So the total number of flat screen TVs, healthcare, education, all the things humans are getting better and better at doing and making that will become uh you know Bitcoin's purchasing power will increase by 3%. Now it's up to you if you consider 3% a good investment. So in the year 2175 someone may ask is Bitcoin an investment or is it a currency? And the answer is, well, if you consider 3% a a 3% increase in purchasing power per year an investment, then I guess it would still be an investment. But by then, most people will understand that currencies naturally increase in value every year because there's a fixed supply of the currency and the total amount of goods and services uh represented by that currency uh keep going up. Um, so over the course of a new currency being adopted, it starts as an investment and it transitions to being both an investment and a currency. And eventually when almost everybody's using it as both an investment and a currency, then it becomes a unit of account. At that point, so many people are using it that they're like, why are we keeping our books in US dollars? Why are we pricing things on the storeshelves in US dollars? because everybody's coming in here and you know we're having to list the Bitcoin prices next to the US dollar prices on everything and every US dollar we get we convert to Bitcoin anyway. Why don't we just list the prices in Bitcoin since that's what everybody wants to spend and what everybody wants to save. Um so the unit of account function of money typically happens much much much later in the adoption cycle as compared to uh store of value which happens first and then medium of exchange which happens later. So hope all of that is helpful. uh we are still very early in the adoption of Bitcoin with less than you know or let's call it roughly 5% of the world that owns any Bitcoin and as a percentage of global wealth Bitcoin only only represents 1/5 of 1% and at some point in the future it will represent a radically larger amount than that. So right now it already is a currency. I already use Bitcoin to buy everything I buy. But it's also an investment because we're so early in the adoption cycle. So when I record videos, some of the videos I record focus on Bitcoin as an investment, some of it focus on Bitcoin as a currency. And sometimes now and then people are confused because they're like, "Wait, what is it?" And the answer is it's both. Every currency is eventually uh a store of value and a medium of exchange. And every thing that is becoming a currency that has a small amount of adoption that will one day be a large amount When something is becoming demonetized, that means it is reversing that process where people are stopping using it as a medium of exchange. They are stopping using it as a unit of account and ultimately they stop using it as a store of value. The same has been happening with gold and silver for a long time where gold has been demonetizing silver. That means little by little the value of an ounce of gold as compared to the value of an ounce of silver keeps going up because it keeps effectively sucking uh value from silver into gold. Well, the same will happen in the near future with gold and bitcoin. Right now, gold is on a tear because it's a 5,000-y old asset and central banks are buying a ton of it. But at some point in the future, central banks who are not yet buying Bitcoin will start and that will start the process at the nation state level of the demonetization of gold uh in favor of the monetization of Bitcoin. Bitcoin is already monetizing very quickly for average people. It's still just very early in that process for nation states and large corporations and things like that. So, Bitcoin is is an investment and a currency. It is a store of value and is becoming a So, Bitcoin is a sorry my internet is flaky. Bitcoin is a store of value. It is becoming an a medium of exchange and one day will also be a unit of account. In the meantime, it is a fantastic investment in addition to an amazing currency. It is both.