When I was at school, I used to collect cards to fill up albums.
What was fun about it was that I wasn’t the only one, every kid at my school was into it.
I remember we used to eagerly watch the class clock until lunch break, the period that really gave us a long stretch of time to trade for the cards we were missing.
Learning to negotiate was a necessary skill in the race to completing an album.
For one, not every card was worth the same amount. Take football cards for example. The better the player, the scarcer the card. These cards were worth more than regular ones, usually trading at five or six cards to one. The price was usually set by our impromptu market; that is, whatever the rest of the kids were paying.
Learning how to get the best deal while trading for each card was key. Usually, the longer someone had been collecting to fill an album, the more invested they were…so the more they were willing to pay.
Sometimes cards were so rare that kids weren’t willing to give them up for any amount of cards. That’s when you would get out the big guns: money, lunch, board games…anything we could exchange that held extra value to us at the time.
In a way, through card trading we had unintentionally agreed to use cards as a currency. One whose value fluctuated depending on the cards that were available each day on the ‘market’. And one whose future had value as long as kids kept collecting the cards.
Bitcoin is backed by confidence
Once kids stopped trading — because they had completed the album, or lost interest — the value of the cards decreased considerably.
I thought about this collectible fever this week after getting a few calls from friends on how to buy bitcoin. More specifically, I thought about how anything can be used as a currency as long as there is consensus that there is value there.
Bitcoin’s value is based on what people are willing to pay for it. In other words, they are backed by confidence.
Yet this is not limited to bitcoin. Fiat currencies are also backed only by confidence, and this applies to any currency that has been used at any point in time: dollars, pesos, shells…you name it.
If no one was willing to exchange them, or there’s too many around, the value will fall quickly — as anyone who has been through hyperinflation or a bank run can tell you. Any currency can go from having value to almost being worth nothing from one day to the next if there is a loss of confidence.
The thing that makes bitcoin different is that it is a decentralised system. That is, there is no centralised authority controlling the currency or network. Bitcoin achieves this truly decentralised system through blockchain technology.
Bitcoin is volatile. I’ve owned some bitcoin for a few years now and it’s been a roller coaster ride.
It’s speculative, but to my mind there’s obviously value in there too.
As I’ve written before, our financial system is out of whack. Bitcoin is just another sign that our financial system is losing confidence, and we could be facing more controls on our wealth with things like negative rates with debt at record highs.
In fact, Yahoo! Finance recently run an article titled ‘How Bitcoin Is Helping Middle-Class Users Survive the Pandemic.’ It features people resorting to bitcoin after being locked out from the financial system, struggles with capital controls and to gain some control over their wealth.
There’s also the fact that we are unlikely to see much growth in the future with the system bogged down by debt. At the end of the day much of the speculation we are seeing — not only in bitcoin but everywhere in markets — is fuelled in some part because there is no prospect of future growth, of prosperity. The days of working hard at a job and saving to accumulate wealth are over for now.
Will bitcoin be around in 10 years’ time, in a month, in a day? I don’t know. There are no guarantees, much like with fiat currencies. It could lose confidence and go up in flames or could be banned.
It’s certainly a good sign that, believe it or not, bitcoin has been around for over 10 years now. And that the recent rises have been fuelled by adoption from financial institutions like Square, PayPal and MassMutual to name a few.
Bitcoin’s story is too big to ignore and it’s more to it than just a speculative story.
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