BTC investment or BTC standard?

Source: Liu Jiaolian

There is a difference between investing in Bitcoin and being Bitcoin-based. This may seem like a semantic argument, but it is not, because the two groups behave completely differently and their mindset is completely different. In this post, I will explain what I mean by "Bitcoin-based".

Bitcoin Investors

Bitcoin investors are those who seek returns in USD (or other fiat currencies, but without loss of generality). Their base currency is USD, and that is how they measure wealth. This is understandable because that is how they have been indoctrinated, but this mentality has been manipulated from the beginning.

First, it is difficult to measure how much your assets have appreciated. If calculated strictly in USD, you may have received a certain percentage of the return (such as 30%), but in how long? If it is an asset such as real estate, it may be 10 years, or it may be 10 months. Obviously, 10 months is better, but how much value is real? How much can you buy with the return, and do you get back the same money you put in?

Inflation

Because of course you have to account for inflation. Investing in dollar-based assets means you have to account for inflation. If your investments go up 30% while inflation is 30%, you haven't actually gained anything. In fact, you've likely lost value because you're subject to capital gains tax.

There's also the question of what measure to use to measure inflation. Many investors use the dollar, which is pegged to the CPI index, to measure how much they've gained. But that's also flawed because the CPI is a manipulated measure. The Bureau of Labor Statistics almost arbitrarily makes a hedonic adjustment to the CPI that makes it lower than actual prices. So if your investments have merely kept up with the CPI, you've likely lost ground in terms of purchasing power. It's not a good measure.

Monetary Expansion

The classic definition of inflation is monetary expansion, and the M2 money supply is a common measure of monetary expansion. M2 was $287 billion in 1959 and will be $19.4 billion in 2021 (more on that later), an annualized growth rate of about 7%. Most investments look pretty terrible if you use that metric. You are likely losing money because it is hard to consistently earn 7% every year, even on average. Financial advisors measure themselves against that 7% number, and most people don't hit that mark. So if your investments are keeping up with the monetary expansion of M2, you are just keeping the numerator growing in proportion to the denominator. Likewise, you are probably losing money as a percentage of the money supply because of capital gains taxes.

But even then, the statistics aren't great. The Fed stopped calculating M2 in 2021 and came up with something called M2SL, most likely to add more fake factors that they can use to game the metric. Why did they do that? Because investors started measuring their returns against M2. Especially during the pandemic, M2 has risen so fast that most investments are nonexistent when measured in M2 terms. So now we have their modified money supply, called M2SL. There are all sorts of problems with how M2 is measured, and the overall statistic is notoriously unreliable. So even this harsh measure can be gamed to make their returns look better to investors.

The Bitcoin Standard

What's left? You can measure your investment in gold, cows, a tailored men's suit, or even a Big Mac. These are all useful ways to see how much purchasing power you have relative to the past, but they are all flawed, lagging indicators, and relatively easy to manipulate.

For the red-pilled investor, Bitcoin is the true measure of wealth because it is the most difficult to manipulate. When you accept that, that's when you adopt the Bitcoin Standard. In other words, Bitcoin will become the standard by which you measure your investment returns, not the dollar, not the CPI-adjusted dollar, or the M2-indexed dollar.

Conclusion

There are undoubtedly a lot of Bitcoin investors out there. Between exchanges, ETFs, and even apps like Robinhood, Venmo, and CashApp, there are a lot of people who own Bitcoin. But that is different from the Bitcoin Standard. The people who are most likely to hold Bitcoin for the long term are the Bitcoin Standard holders.

I know for myself, and I finally converted when I read Saifedean's book of the same name. Since then, I have a very different mindset about money, and I view the dollar as a depreciating asset. My standard of measurement has changed. In economics, we call this function of money a unit of account.

It feels very freeing because I don't have to worry about my investments, mainly because I don't have a lot of investments. I use the Bitcoin Standard, and I keep my value in my unit of account. We are so used to being stolen from through the fiat system, we have learned to live with depreciation. Depreciation is a constant and never-ending burden.

The Bitcoin Standard frees us from this investment burden. It is also the game-theoretic end state of money. The hardest currency wins. You can convert now, or you can convert later.