I write about Bitcoin, Crypto and finance to break down complex ideas so everyone can understand them. Join me as I view Bitcoin from a different lens.
Before we go on, if you don’t understand inflation read this. If you’re new to Bitcoin and don’t get what it is, read this first.
A Volatile Asset Class
Courtesy of Visual Capitalist
As a newer asset class, Bitcoin and other cryptocurrencies are indeed more susceptible to volatility than traditional assets such as stocks or bonds.
Like me, if you live in the US, Western Europe or other developed economies, you probably see Bitcoin as a volatile asset. Other cryptocurrencies even more so. The roller coaster of price swings up and down can cause even the most experienced investor a bit of queasiness in the stomach. If you’re a long-term Bitcoin bull like me, you do your best to calm that indigestion down by ignoring the 51% drop from mid April to mid May and looking at the price over the years.
However, while we are correct when see Bitcoin as volatile, we are doing so from the lens of Bitcoin priced in US Dollars. Or as traders or investors call it, the BTC/USD trading pair.
A Different View: Lebanon
Beirut, Lebanon
As you may have guessed from the headline, in this blog we are going to look at Bitcoin from the point-of-view of another country far from the USA. A country that is experiencing hyperinflation: Lebanon.
Lebanon is a small country in the Middle East on the east coast of the Mediterranean Sea. It is north of Israel, west of Syria and has over 6.8 million inhabitants. It has some great beaches, world-famous cedar trees and some of the greatest talent in the world have come from Lebanon or can trace their roots there, including my wife. In fact those who consider themselves Lebanese around the world could number as much as 14 million.
Once called the Paris of the Middle East, the national scene started getting worse with wars in 1982 and 2006. Starting at the end of 2019, Lebanon has experienced hyperinflation. Factors that have contributed to hyperinflation include government corruption and borrowing money without a plan to pay it back though increased production of good and services. The increasing influence of Iran-backed Hezbollah has not helped the tourism industry either.
Recent details of the money situation was recently reported on by Reuters.
TLDR. Let’s say you live in Lebanon and your life savings was was stored in Lebanese pounds as of December 2019. If it was valued at 100,000 US Dollars, and you let it sit in the bank and didn’t spend any, right now it would be worth about 10,000 US Dollars.
Does Bitcoin Fix this?
In short, yes. And here are four reasons why:
Bitcoin’s Long-term Price Appreciation
Bitcoin’s rate of creating new bitcoins is steady, enforced by computer code and decreases by 50% every 4 years. This makes is appear deflationary compared to the currencies of central banks like USD, the Euro or the Lebanese pound. In the latter case, more and more money is being printed (or created digitally) to solve problems, with no limit in sight.
Bitcoin’s price on December 1, 2020 was around $19,200 in USD. Currently sitting at around $33,500 as of July 1, 2021. Keep in mind this is still with Bitcoin dropping about 50% from its all-time USD high in April.
In the above example, if 25% of your life savings was in Bitcoin, assuming you were not receiving interest, that portion would be $43,619. Your Lebanese pounds would be worth $7,500. So you would have lost about half of your savings instead of 90%. The same idea with Bitcoin allocation of that same $100,000 in life savings:
10% — $26,447
20% — $42,896
30% —$59,344
40% —$75,792
50% —$92,240
60% — $104,688
70% — $122,135
In case that’s not authentic enough for you, a Lebanese Bitcoiner runs an online Bitcoin education portal called BitcoinduLiban.org and also posts regular price updates in the local currency here:
On this day last year, USD/LBP was $1/4050.
Today your 15m LBP would be worth one of these:
-$867 (@ 17,300)
-$3,703 (@ 4050)
-$14,072 (had you bought #Bitcoin )
The choice was yours, and you still have that choice today.
Protect your wealth with #BTC #Lebanon #BitcoinduLiban https://t.co/UqcTW8RuBX— 🇱🇧🇵🇱 Marco.hodl ⚡ (@marco_bdl) July 3, 2021
You get the idea.
Bitcoin is Transportable
To avoid inflation, one could also argue the case for holding your savings in gold. While the price hasn’t appreciated that much, increasing a grand total of 18% for the past decade, it tends to be less volatile. After all, it has been the preferred store of value on Earth for a few thousand years and over $11 trillion is currently stored in gold.
However, in a country with hyperinflation, one is faced with the challenges of carrying around the gold. Bitcoin and other cryptocurrencies can be held in what is called a “wallet” that is the size of a flash drive, or even a digital one on your computer or smartphone.
Bitcoin is Borderless
At the moment in Lebanon, you cannot easily withdraw your money from the bank or send it overseas. You can send or receive Bitcoin with a wallet, and no government or anyone else can block the transaction.
Bitcoin is Secure
Holding Bitcoin in a private wallet allows one to securely hold it. No one can access it without your passwords and other security protocols you set up. Unlike holding gold or a pile of cash, no thief can steal your Bitcoin. And no government can physically seize your Bitcoin at the border without these.
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Note: This article is not intended as financial advice and does not take your personal financial situation into account. The intention of this content is educational in nature and basics on my observations and opinions. Cryptocurrencies are volatile assets and one should understand the risk before investing or trading. You shouldn’t borrow to invest or trade.
Disclosure: I am invested in Bitcoin, Ether and other cryptocurrencies.
