In Accra, Ghana, back in 1997, a plot of land was worth about $100. Today, the average price of a plot of land has increased to approximately $10,000 some as high as $100,000. This significant increase in value can be attributed to two key factors: scarcity and rising demand. These two factors are the basis for price appreciation of any asset - with that understanding let’s dive into this write up.
Over the past 14 years, the world has witnessed the astronomical rise of Bitcoin. Launched in 2009 as a new form of digital money, Bitcoin has matured into a financial asset that is delivering returns traditional investments like mutual funds, bonds and real estate can only dream of having.
When Bitcoin first launched, its price was less than a penny. Today, one Bitcoin is valued around $31,000. That means if you had invested $100 in Bitcoin at its inception, your investment today would be worth $310 million. If you waited to purchase bitcoin in 2011, the $100 would be worth a cool $10 million.
Bitcoin has similarities to assets like gold and real estate, whose value are tied to their limited availability. But while these assets are scarce, they're not finite. More gold deposits can be discovered, and real estate can become available through land development, urbanization and land reclamation. Bitcoin, on the other hand, has an absolute cap. The algorithm that governs it ensures there will only ever be 21 million bitcoin ever created.
This places Bitcoin in a category of its own, making it the most scarce asset in the world.
However, scarcity alone doesn't guarantee value. A key ingredient for Bitcoin's success will be desirability or rising demand. As more and more people seek to own a piece of Bitcoin, and with the quantity capped at 21 million, the only direction for the price is up. This combination of rising demand and limited supply drives up the value of bitcoin - similar to the plots of land in Accra. I believe as more people come to understand Bitcoin, there will be tremendous demand for it.
Unlike other traditional forms of investments, you don't need to buy a whole Bitcoin. One of the greatest misconceptions is that to own Bitcoin, one must purchase a whole coin, which at its current price can seem challenging to many. Bitcoin is divisible, and one can buy a fraction of it.
Imagine trying to buy a fraction of a plot of land or a fraction of a gold bar; it's not feasible. However, with Bitcoin, you can buy as little as $1, $10, or $100. It is accessible to anyone and everyone in any currency. Bitcoin is democratizing the world of investing in an unprecedented way.
I believe there are several compelling reasons why individuals may choose to own Bitcoin which will drive up demand.
Firstly, Bitcoin offers the potential for substantial returns. Its historical performance has demonstrated remarkable growth, surpassing traditional investments. Secondly, Bitcoin provides a protection against inflation. With its limited supply and decentralized nature, it is not subject to the same risks associated with traditional currencies or local investments. Thirdly, Bitcoin grants individuals greater financial freedom and control over their wealth. It allows for fast and secure global cross-border transactions without the need for intermediaries like banks. Additionally, Bitcoin encourages financial inclusion by providing access to financial services for everyone in the world with an internet connection. Lastly, Bitcoin represents a paradigm shift towards digital assets and wealth in an increasingly digitized world.
You can carry your Bitcoin with you wherever you go, but you cannot do the same with land.
Bitcoin is no longer viewed as an investment for risk-takers. The fact that BlackRock, the world's largest asset manager, has filed for a Bitcoin spot ETF this year, proves big-time investors are recognizing the digital asset. BlackRock's CEO, Larry Fink, has publicly compared Bitcoin to 'digital gold' and lauded it as an 'international asset' that is not linked to any country’s currency. These endorsements highlights Bitcoin's gradual shift to becoming an investment asset of choice.
In my view, the greatest risk for Bitcoin lies in U.S. regulation. As a powerhouse in the global economy, the United States wields profound influence on Bitcoin's future. At present, the U.S. hasn’t clearly stated its stance on Bitcoin.
There are promising signs emerging though as major financial players like BlackRock, Fidelity, Charles Schwab, and Citadel signal their interest. Should the U.S. choose to fully embrace and adopt Bitcoin, it would propel its credibility and value.
I have a target price for Bitcoin reaching $1,000,000 per coin before 2035. As this digital revolution continues, I remain incredibly optimistic. The global adoption of bitcoin is not a question of 'if', but 'when'.
Disclaimer: The information presented in this article is intended for general informational purposes only and should not be considered as financial or investment advice. It is important to note that investing in securities or other financial products involves risks, and individuals should conduct thorough research and seek professional guidance before making any investment decisions. The views and opinions expressed in this article belong solely to the author and do not represent any specific recommendation or solicitation to engage in buying or selling securities or financial products.
Hello Dr. Hans, great post! Coincidentally, we have the same last name and were both born in Ghana. I too, just like you is very curious about the lack of information when it comes to financial literacy especially in inner city communities and amongst immigrant families. I recently shared a post on my sub stack with a thesis centered around the need for an inclusion of financial education in our school curriculums. Please give it a read and provide me with feedback if you can kindly do so! Looking forward to more posts from you and maybe even collaborating in the near future.