Why Bank Negara and EPF should buy Bitcoin

Hard Money

The antidote to this plague of easy money – money that can be created at will by a monopolistic organisation (the central bank) at the behest of the government – is to switch to a hard money standard.

Hard money is money whose supply is capped and can’t be manipulated by the powers that be – or anyone for that matter. 

For millennia, gold served as hard money. Many ancient civilisations – from the Egyptians, the Chinese, the Indians and the Romans lusted over it, hogged it, went to war for it and draped their kings and deities with it.

Much more recently, and even when government-issued money was first devised, it was still tied to the gold reserves of the country. A nation couldn’t issue paper money unless these were backed one to one to their gold reserves. They were on the gold standard.

Even today, where national currencies have been cleaved away from the gold standard, and where governments are free to print money wantonly and inflate its value away, central banks still keep large gold reserves.

This is due to some of gold’s characteristics: It is scarce as it is difficult to extract, does not decay, rot or rust, can’t be counterfeited, and is aesthetically pleasing.

These characteristics make gold inherently valuable as money, not just valuable by government decree (aka enforced by men with guns), as fiat currencies are.

Bitcoin

But now technology offers an alternative – something that seems far superior. An alternative that can function as hard money, is easy and cheap to transact with, and is an asset that will appreciate in value over time.

This alternative is bitcoin.

Bitcoin, in a nutshell, is a decentralised digital currency whose transactions are verified cryptographically and recorded in a public, distributed ledger called a blockchain. If this sounds like gobbledygook, watch this explainer video to get a better understanding of it:


Most importantly, there will only ever be 21 million bitcoins in the world as its supply is hard-capped, making it the only institutional-grade asset where supply is unreactive to demand. No matter how high the demand for bitcoin is, there will never be more than 21 million bitcoins in the world (almost 19 million of which have already been mined). This makes it the ultimate scarce asset.

Also, since the bitcoin network uses the SHA-256 encryption algorithm, it is, for all intents and purposes, unhackable. In addition, transactions can be sent online at any time, they settle in minutes and they only cost a few cents. And since it doesn’t have a leader or employees, isn’t tied to a corporation and doesn’t have a single point of failure, it can’t be controlled or subverted by bad actors. It has no counter-party risk.

Bitcoin’s many attractive attributes have not gone unnoticed, with demand for it skyrocketing, and bringing its price along for the ride. 

“…there is very high stakes game theory at play here, whereby if bitcoin adoption increases, the countries that secure some bitcoin today will be better off competitively than their peers. Therefore, even if other countries do not believe in the investment thesis or adoption of bitcoin, they will be forced to acquire some as a form of insurance. In other words, a small cost can be paid today as a hedge compared to a potentially much larger cost years in the future. We therefore wouldn’t be surprised to see other sovereign nation states acquire bitcoin in 2022 and perhaps even see a central bank make an acquisition.” ~ Fidelity

Below is a non-exhaustive list of pension funds, insurance providers and high profile publicly-traded companies that have put bitcoin (the pure form or its derivatives) on their balance sheet:

https://www.freemalaysiatoday.com/category/opinion/2022/01/31/why-bank-negara-and-epf-should-buy-bitcoin/

In short, bitcoin is a new, robust, digital-native hard money; an asset which has outperformed all traditional assets since its inception; and is a way to opt out of the unjust, inflation-infested world of traditional finance – all rolled into one. 

It is the asymmetric bet of our lifetime.


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