Inflation Will Destroy You. Bitcoin Will Save You.

Today, bitcoin hit a new all-time high: $68,742.31 on coinmarketcap.com, $69,044.77 on coingecko.com, and $68,999.32 on messari.io (the discrepancy is due to different exchanges being tracked by each). Taking an average of those gets us a “rough” new BTC ATH number of $68,928.80.

However, today we also saw BTC (and the rest of the crypto market) drop substantially, with BTC selling off as much as $7k from its ATH on some exchanges. 

Of course, we have to remember what ALWAYS follows a new ATH: a rapid sell-off. This is due, in part, to catching the greedy investors chasing the move up off guard, but it’s also because when we hit a new ATH, 99%+ of BTC holders are in profit. It’s natural and expected at this point that taking profits at the ATH and waiting for a 5-15% pullback to buy back in will net a healthy gain in BTC position size. 

The crash was also attributed to news about the Evergrande situation becoming more tenuous. 

However, overshadowing both of those reasons for the crash is the dread of inflation seeping into the markets these days, especially in the wake of the Fed’s recent comments. 

What’s been the case is that the crush of increasing prices continues to grow, and there appears to be only one relief — bitcoin.

No amount of inflation is good, but now it’s noticeable and unnerving. The good news is that you have recourse. Sound money exists – it’s called bitcoin. This is an article written for hardworking people who are concerned about rising prices, a broken economy and their own self-preservation in an uncertain future.

That’s the thing about inflation – unless you’re thinking about it constantly, or you’re from Argentina, Zimbabwe or any other country that has experienced hyperinflation, you probably don’t notice small price changes. My dinner cost way more after just a week so I noticed. But when the price of milk sneaks up by 17 cents at the grocery store one week, and then by 21 cents a few weeks later, it’s much harder to spot.

The “official” Consumer Price Index (CPI) is 5.4%, but that’s based on a basket of goods that is intentionally redefined to exclude certain goods whose cost have gone up, and includes goods whose prices are relatively stable. That’s like taking a group of 10 professional basketball players but removing those over six feet and adding the short guy who got cut to demonstrate that the average height of basketball players is 5 foot 9 inches. It’s just not true.

Inflation is different for everyone depending on what you’re buying. But roughly, I’d estimate that inflation for most people at this moment – measured by the things we actually want to buy, like homes in desirable areas, quality education, vacations, grass-fed meat, organic vegetables, etc. – is probably between 10% to 20%.

So here’s the question: Did you get a 20% raise at work this year? Because if not, then you’re not doing as well as you think.

Let’s say the phone you wanted cost $800 last year. Last year you earned $100 a day. So it would take you eight days of work to be able to afford the phone.

But this year, the phone costs $960. Let’s say you worked hard, improved your skills and got a 10% raise (which by most standards is considered a large raise). Now you earn $110 a day. That’s great, right? Well, not really since inflation on the phone was 20% and your wage only went up by 10%. That means your buying power actually decreased by 10%. Put another way, the same phone now requires almost nine days of work for you to afford it. Even though you’re getting paid more, you have to work more hours to afford the same phone. What’s more, you’re probably more efficient at your job, so your output per hour is higher. In this example, you’re working more hours at a higher output just to afford that phone!

WTF Is Happening In 2021?

Here’s where I get really concerned. People are quitting their jobs at record rates. And yet a quick Google search reveals that about 60% of Americans cannot come up with $1,000 in an emergency. How could 60% of Americans basically have no savings, yet not need to work? What are they doing for money? I really don’t know the answer, but something doesn’t add up.

We’ve all heard about the supply chain issues, too. Ships are stuck in ports … there are no containers … there’s a shortage of truck drivers … your furniture is on backorder and won’t arrive for six more months. Or, your favorite restaurant has a sign that says, “Please be patient. We are short staffed and service will be slower than usual.”

I’m concerned and you should be, too. Everything we want to buy costs more. The minimum wage that people are willing to work for has almost doubled, and yet people are quitting jobs at record rates. And products are long delayed or not showing up at all. At the same time, the increase of all dollars available in the system (the M2 money supply) has increased by at least 30% in the last 18 months. That means 30% of all dollars in existence were created in the last year and a half alone! The average person is starting to notice that something is wrong and wondering what they can do about it.

My answer is: BUY BITCOIN AND SAVE IT. Bitcoin is how we can protect our time, our energy and the value we create. Bitcoin is self-preservation.

Last year, one bitcoin cost $15,000. As of today, it was worth as much as $69,000. Going back to our previous example, working for $100 a day means it would take 150 days to earn enough to buy a bitcoin at $15,000. If you bought that amount of bitcoin a year ago, that means you had purchasing power to buy almost 19 phones (at $800 per phone). If you held the Bitcoin until today, you would have the purchasing power to buy 67 phones (at $960 per phone). Based on your wage this year of $110 a day, that means your buying power increased as if you worked 590 days.

The dollar is a terrible vehicle for saving because the value erodes over time through inflation. We established that 20% inflation is painful because you have to work more to get the same amount of stuff. So is 2% inflation okay? NO.

So, why does the Federal Reserve Board target 2% inflation and say “it’s the sign of a healthy economy?” THAT IS THE BIGGEST LIE WE HAVE BEEN FORCED TO BELIEVE. All it means is that you lose 2% of the value you create every year, and it’s compounded annually if you keep storing your value in dollars. Given enough time, the purchasing power of a dollar approaches zero.

Bitcoin, on the other hand, is the best vehicle ever invented for saving. If you store the value you create today in bitcoin, you will retain your ability to buy the same amount of stuff in the future, if not more. We are in the most volatile stage of the Bitcoin network’s life, but as the Bitcoin network grows, and the volatility decreases, I expect the value of one bitcoin to increase significantly and become much more stable.

We don’t save our value in grains of sand. Why? Because sand is infinite and it costs nothing to acquire, therefore it’s not a good way to approximate our effort and time, which is the ultimate scarce resource.

We shouldn’t save our value in dollars for the same reason — because the Fed can print more (dollars are not scarce) and it costs nothing to produce more dollars (it’s done with the click of a button). The central banking system requires us to trust that the central bankers won’t print too much money and destroy the value of the dollar. Unfortunately, they will always print more money because they can, because they stand to benefit by doing so, and because it basically costs nothing for them to print more dollars.

The two most important properties of bitcoin are that it is limited to 21 million and that the scarcity is enforced by a decentralized network that is incentivized to maintain the 21 million limit. Bitcoin is perfectly scarce, which makes it more desirable as a store of value than grains of sand, dollars, and even more desirable than gold. And, the monetary policy of Bitcoin is enforced by the decentralized network of participants who choose to run the Bitcoin software. More concretely, the federal government is the single body that’s in charge of the supply of dollars, but no one is in charge of Bitcoin, therefore, no individual can change it!

What Should You Take Away?

We all want to have enough food. We want to afford shelter. At the most primal level, we have an instinct to survive.

In the last five years or so, it has become increasingly difficult to survive in America. Just because someone works hard for 40 or 50 hours a week, it does not guarantee they will make enough money to pay for food and bills at the very least. It is getting tougher and tougher to survive, and this trend is accelerating. The inflation genie is out of the bottle, and he won’t go back in (it’s not transitory). Food is more expensive, housing costs are way up, and gas costs significantly more, just to name a few basics. Yet, the U.S. government just keeps printing more money and will continue to increase the debt ceiling. People are scared because their survival is being threatened.

Remember, inflation hurts your buying power no matter what. But 2% inflation is a slow bleed that most people don’t notice. Now we’re experiencing at least 10% inflation, and it’s scary. People are losing the value they are creating, and it’s happening at a faster rate than they are used to. Every day at work is a waste of time unless you can figure out a way to save the value you create.

If you feel confused, concerned or downright scared about inflation, the rising cost of living, and getting through the turbulent years ahead, then you need to explore bitcoin.