Bitcoin (BTC) emerges as an alternative and the “optimal tool” for saving in this new economic epoch compared to conventional assets, as per a fresh research paper from Unchained.
The latest study results from Bitcoin financial services company Unchained indicate that Bitcoin’s exceptional monetary characteristics, including unchangeable scarcity, establish it as the top solution to the “innovation trap” investors confront.
Unchained analyst Joe Burnett delineates the innovation trap as a scenario where innovation-propelled free market dynamics generate an augmented supply of specific goods and services, which subsequently leads to reduced prices and, ultimately, the devaluation of such assets. Per Burnett, this erodes one’s capacity to establish long-term savings.
“In a realm of plenty, hyper-efficiency, and fiercely competitive markets, hoarding substantial wealth outside of Bitcoin will become increasingly challenging.”
Thankfully, “we’ve identified the trap,” Burnett remarks, drawing nearer to the economic singularity where “most wealth converges towards Bitcoin.”
“Your riches are dissolving”
Dispensing research outcomes on the worth of diverse traditional assets, including fiat currency, equities, bullion, and real estate, Unchained elucidates that they are all susceptible to expanding supply, with their value veering towards zero over time.
For instance, by possessing the United States dollar and other fiat currencies, the study noted that over time, the currencies devaluate in comparison to essential consumer products.
The analysis stated that these currencies are structured to devalue against goods and services that can be manufactured more rapidly and economically, such as housing, food, and energy.
“The U.S. dollar has declined by 92.8% during the last 5 years.”U.S. dollar depreciation over time. Source: Unchained
Burnett suggests that as more individuals acknowledge that “money engineered to depreciate against fundamental consumer goods is not an excellent savings instrument,” they endeavor to retain their savings in other assets like equities, precious metals like gold and silver, and real estate.
As per the findings, these also undergo a state of decline, with the 20-year Treasury Bond exchange-traded fund (ETF) plummeting by over 94.8% in the past five years. Stock investors face various risk layers stemming from intense rivalry and equity dilution (i.e., the issuance of additional shares), leading to a de-escalation in the value of existing shares.
“As market efficiency increases and competition intensifies, surplus profits (alpha) ultimately plummet towards zero in the long haul, alongside the market value of the equity.”
Utilizing the S&P 500 as an instance, the research disclosed that this index is “down 87.6% during the past 5 years.”
Burnett observed that even gold and silver are not resistant to the influences of escalating production capacities and competition.
The results reveal that the annual gold production rate surged from below 100 tonnes in the 19th century to slightly above 1,000 tonnes in the 1950s. Technological enhancements in mining and processing have simplified and optimized the extraction of this gold, contributing to a gradual production increase, which presently stands at over 2,800 tonnes per year.
“The potential supply of circulating gold faces no substantial ceiling, and holders of gold will witness their savings perpetually devalued as humanity becomes more adept at mining and extracting gold.”Annual gold production. Source: Unchained
Bitcoin — the fresh economic actuality
The findings resonated with Burnett’s views earlier in 2024 when he contended that Bitcoin stood out as one of the leading monetary tools that can’t be produced in excess due to its “immutable absolute scarcity.”
In the paper, he showcased Bitcoin’s “exceptional monetary attributes” in contrast to other asset classes, asserting, “it’s not just reasonable, but judicious to quantify conventional wealth storehouses in this superior asset.”
Monetary attributes of various assets. Source: Unchained
Immutable scarcity lies at the heart of Bitcoin’s value proposition as a means of saving. This feature will gain even more significance after the imminent Bitcoin halving, slated to take place in just a few days. This halving is anticipated to slash issuance from 6.25 BTC to 3.125 BTC per mined block.
Michael Saylor, a distinguished Bitcoin proponent and advocate, is also convinced that BTC surpasses other asset categories.
Source: Michael Saylor
Burnett concluded by asserting that Bitcoin’s revelation 15 years ago as an innovative savings, trade, and economic calculation tool has given rise to a fresh economic actuality that cannot be overlooked.
“If one disregards it and persists in saving in inferior, overvalued assets, economic rivals will embrace it and surpass you.”
This write-up does not contain investment suggestions or advice. Every investment and trading decision involves risk, and readers should conduct their own evaluations before making a choice.
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