What do Bitcoin and college tuition have in common? As of this writing, the prices of both are soaring. And one is more volatile than the other. Which one is it? The answer may shock you. Hint: It isn’t Bitcoin.

So says Arry Yu, Chair of the WTIA Cascadia Blockchain Council and Managing Director of Yellow Umbrella Ventures. During her latest “Ask Me Anything” session on the Bitcoin Fundamentals in March (full presentation available here), Arry pointed out that Bitcoin is “still the best-performing asset class for the last 10 years.” She also noted, “I’d say college prices are volatile. [College is] becoming more and more expensive for people. That’s volatile.”

All humor aside, Arry led an informative, hour-long discussion on the fundamentals of Bitcoin. She also dispelled a number of misconceptions many people hold about cryptocurrency. 

As of this writing, Bitcoin is trading at nearly $60,000 — slightly lower than its all-time high of $61,556. These sky-high prices might sound like a recipe for a bubble that could burst at any moment, but Arry pointed out that if you believe in the fundamentals, as she does, Bitcoin is a sound asset and the best-performing asset of 2021, the past 12 months, and decade. In addition, it’s likely to become the next world global reserve currency, possibly sooner than later.

Just what are the fundamentals of Bitcoin, and what makes it such an appealing opportunity for investors? According to Arry:

• It’s in scarce supply: There’s a hard cap supply of 21 million on Bitcoin. In other words, no more than that amount will ever be created. In 2140, when the final Bitcoins have been minted, the “change of supply” — that is, the increase of Bitcoin in circulation — will be zero. It can’t be printed infinitely like paper money, so it can’t be devalued over time, like fiat currencies such as the dollar. In fact, the limited supply means the demand for Bitcoin will likely only increase over time, which will likely drive up the value. This is already happening, as institutions and publicly traded companies are buying it up in today’s market — a trend that will likely continue as Bitcoin, with its $1 trillion market cap, is now an institutional-grade asset.

• Its rate of change is fixed: Even if Bitcoin’s price goes up to $58,000, $100,000, or $300,000, its rate of change is hard-coded. “That’s also why Bitcoin is great money and a great asset, Arry said. “Bitcoin’s [like gold’s] rate of change is known. Gold’s rate of change is about 1.5%, which is why it was once seen as the standard globally as the best store of value. Today, that standard is Bitcoin.”

• It’s fungible and divisible: Bitcoin can be fractional (these “pieces” are called Satoshi) just like you have 100 pennies in a dollar. So it’s possible to buy a dollar or $10 of Bitcoin, or whatever amount you choose, rather than buying a whole one for $50,000 or more. $10 of Bitcoin is about 17,000 Satoshi’s, and 17,000 Satoshi’s = 17,000 Satoshi’s.

• Bitcoin is decentralized: It’s not owned by any central party or government organization. It’s also portable. Since it’s fully digitized, it’s more portable than paper money or gold.

• It’s fully open and transparent: Bitcoin is on an open ledger, so you can see and verify all the transactions happening in the world at any given time. Conversely, paper money or gold is not as transparent or verifiable as Bitcoin.

As Arry explained, Bitcoin has all of the characteristics of “great money,” and it is “one of the greatest technology innovations that we’ve had in humankind because it affects each and every one of us… literally everyone on the planet.”

Arry also presented a number of arguments that skeptics make against Bitcoin, such as it’s too volatile, Bitcoin miners will quit due to diminishing returns, a bug could destroy Bitcoin, and mining it wastes a lot of energy. She skillfully debunked all of these myths, pointing out that again, Bitcoin is a solid asset if you understand the fundamentals.  

Moreover, Bitcoin has been stable since its inception in 2008, so Arry said she believed it’s unlikely that Bitcoin will be destroyed by a bug. She also deflated the energy argument, countering that transporting and distributing money is actually less energy-efficient when you consider the physical locations occupied by the banks, employing tellers, powering the automated teller machines (ATMs), and fueling the armored trucks that are used to drive money around and keep it secure. 

In Arry’s words, “Netflix [also] uses a lot of energy. So, if you’re going to use a lot of energy, why wouldn’t you use it to secure the most reliable, decentralized monetary network in the world?”

In Arry’s view, Bitcoin has a ton of upside potential, especially when it comes to ushering in a new era of transparency and globalization for our monetary system. “Bitcoin solves the problem of fiscal irresponsibility and this 50-year monetary experiment of fiat money,” Arry noted. 

Historically, many societies have faltered on the back of a single fiat currency. Since history has a habit of repeating itself, it’s no wonder Arry is optimistic about the future of Bitcoin.

To learn more about the work WTIA is doing in Blockchain, check out our website:  https://www.washingtontechnology.org/blockchain/.

*The opinions expressed in this blog post are the author’s own and do not reflect the views of the WTIA. The information contained in this blog post does not constitute financial product advice or investment advice, nor does it take into account your personal objectives, financial situation or needs.  The blog post is intended solely for informational purposes and past performance is not indicative of future results. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.