Wealth Redistribution via Cryptocurrencies
In the past wealth redistribution typically meant the government taking your wealth through taxation or straight up force and giving it to someone else. The revolution currently occurring in cryptocurrencies is standing that old method of wealth redistribution on its head. If you’ve been using Steemit for any amount of time, or have invested in cryptocurrencies I think you know exactly what I mean. The value of your SBD, Bitcoin, Litecoin and other altcoins isn’t created from thin air. It is a transfer of wealth from others, who are converting their fiat cash into cryptocurrencies. Recently this has begun to include the traditional masters of finance – the bankers and money managers – meaning the value of cryptocurrencies, and the redistribution of wealth, will continue at an accelerating pace.
In order to keep things simple I will use bitcoin as the primary example in this article.
With the price of bitcoin hovering around $15,000 as the year comes to a close we’ve seen a gain of roughly 1,500% in 2017 alone, and growth to a market capitalization of nearly $250 billion. That’s more than all but 13 of the largest listed U.S. companies. Larger than the market cap of Citigroup, Mastercard, Disney, McDonald’s and many other companies that took decades to grow to the level they are at. Bitcoin took 9 years and has made many people rich, and many more people comfortable in the knowledge that they’ll never have to trade their time for money again. Most of these early adopters are the young and entrepreneurial, although you occasionally find the old fart like me talking cryptocurrencies.
On the other side is the traditional bankers, economists and representatives of the old economy. These are the ones spreading FUD, such as Jamie Dimon of JPMorgan, who called bitcoin a fraud because his old model of business is losing value rapidly in relation to bitcoin.
Consider that JPMorgan stock was worth 0.084 BTC on January 3, 2017 and on December 28, 2017 it is worth just 0.0072 BTC. That’s a loss of 91% in value for JPMorgan stock in comparison with bitcoin. And you’ll find a similar picture with every other asset class, from the S&P500 to the 10-year Treasury bonds, and even in relation to that reliable store of value – gold.
Bitcoin has seen amazing growth this year, but at a market cap of $250 billion and daily trade volume of $5.5 billion it has only started to grow. Gold has a global value of $8 trillion, while the global equities market is worth roughly $80 trillion. And when it comes to trading and investing, global equities markets see roughly $84 billion change hands each day and forex markets trade in excess of $4 trillion every day.
Shifting Sands of Wealth
There are many predictions of how high the price of a single bitcoin can go, with some predictions as high as $1 million. That would make the market cap of bitcoin somewhere around $16.9 trillion (depending on the number of bitcoins in circulation), which is greater than the balance sheets of the world’s three largest central banks – who by the way have been printing money at a furious pace over the past 9 years, just as bitcoin has been rising to prominence.
The U.S. Federal Reserve alone creates $85 billion each month, but none of that goes to citizens, instead it is sucked into the vortex of Wall Street to continue funding the bankers, traders and traditional economy. In contrast, the wealth created by bitcoin and other cryptocurrencies goes directly to the people.
As the value of bitcoin increases, so does its relative value to other assets, just like the value of JPMorgan stock fell 91% this year in bitcoin terms.
Consider that the value of the U.S. dollar has fallen 93% against bitcoin this year. That makes those dollars worth less, but the same is true for any asset that doesn’t keep pace with the rising value of bitcoin. Those holding bitcoin (and to some extent other cryptocurrencies) are becoming richer relative to the U.S. dollar, British pound, euro, yen, stocks, bonds and even gold.
This is happening every day without any intervention, regulation or law being passed by the world’s governments. It is simply a free market expressing its demand for bitcoin and what it offers.
Even without government intervention through taxation and force, there are other things that have kept people from investing in bitcoin and participating in the current massive wealth redistribution. As bitcoin and the cryptocurrency markets gain additional adoption, become easier to use, and enter the mainstream this will change – in fact is changing already – but we remain in the very early phase of the massive wealth shift.
You are Part of This Wealth Redistribution
Up to this point, with some few exceptions, the general population and the old guard of the financial and political systems haven’t seen any of the benefits of the growing value of cryptocurrencies. They have blinded themselves to the potential in front of them due to their own intellectual inflexibility, desire for the status quo, and as a form of protectionism and risk-aversion.
These people are beginning to hop on the bitcoin express however, but as their traditional assets continue losing value against bitcoin they can afford far fewer bitcoins than even a year ago. They will have to push bitcoin prices into the stratosphere to participate, and in so doing will make early adopters increasingly wealthy.
And who are these early adopters who will benefit so greatly from the emerging wealth redistribution promised by cryptocurrencies?
First of all it is those who have been with bitcoin since the beginning. The developers and evangelists who have made bitcoin more secure and have brought it into the limelight.
It’s the software developer who initially looked at bitcoin purely from technological interest, but then went on to learn about money, wealth and value.
It’s the former finance professional who first heard of bitcoin in scoffing terms from colleagues, and whose curiosity drove him to learn everything he could about how bitcoin works.
It’s the investors who know what will happen to the value of their equities once the current zero interest rate policy is reversed. Rising rates will likely destroy his equity holdings and so he uses bitcoin and other cryptocurrencies to diversify and reduce his overall risk.
It’s the saver who understands it’s better to forego the consumption economy in favor of holding an asset that is built on sound monetary policy.
And it is us Steemians who understand that our creativity and creations have great value, and that we can unlock that value through the blockchain, redistributing to ourselves the wealth that would have previously gone to our employers. By creating value on the Steemit platform, and by interacting and sharing with others we create a positive incentive cycle that serves to redistribute wealth fairly and equitably, and without the bureaucratic force seen in the old model of wealth distribution.
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