Bitcoin has already massively underperformed Nvidia. While Bitcoin has seen its price increase by about 300% over the past 18 months, Nvidia’s stock has boomed by over 800%. So, to get rich, is it better to buy Nvidia shares or BTC?
Is it a failure for Bitcoin?
Nvidia makes excellent GPUs for the whole world, and it is normal for its shareholders to be rewarded for it.
Bitcoin and Nvidia are a bit like comparing apples and oranges. Shares are not a neutral, censorship-resistant, peer-to-peer currency that you can send to anyone or move anywhere.
They are rather paper assets that are at the mercy of the company’s management, board of directors, and a myriad of operational, regulatory, and jurisdictional risks. You also hold shares in a brokerage account that can easily be closed, frozen, or censored.
Sometimes stocks perform better than Bitcoin. However, if the vision of the Bitcoin standard comes true, it is very likely that holding bitcoins will massively outperform, over the next ten years, holding a basket of diversified stocks like the S&P 500.
It is even likely that Bitcoin will also significantly outperform cash, bonds, and real estate.
Will Bitcoin replace stocks?
In the context of a Bitcoin standard, where BTC would become the “new dollar,” would stocks disappear?
To answer this question, one must first ask oneself how human activity coordination works. How do we enable large groups of people to work together to accomplish extraordinary things?
The first possibility is to enslave a large number of people to force them to work. However, such a practice is not only reprehensible from an ethical point of view, but it does not allow the most efficient production of goods.
The second possibility is to rely on religion or nationalism to coordinate human action.
“Build this pyramid because your beloved Pharaoh desires it, or because it will make Egypt great again”.
Finally, the last possibility is to resort to free markets.
We are now ready to answer the question: Will stocks still exist under a Bitcoin standard?
Stocks will remain crucial
It is very likely that stocks will remain.
Indeed, companies are another excellent way to coordinate human activity in the context of free currencies like BTC.
An excellent way to proceed is to create a company and allow the management team, workers, and external investors to participate in the profits in exchange for capital investment.
The fact that ownership shares of many different companies are listed on the stock exchange is an excellent idea. This creates deep and liquid markets.
It is a much better use of capital than investing everything in government bonds such as U.S. Treasury bills, which help fund a stupid, violent institution that doesn’t know how to allocate capital.
A good currency, neutral, sound, scarce, based on mathematics and energy, like Bitcoin, is the best foundation for a prosperous economy.
It is therefore somewhat like the first layer. You should not use soft money that can be endlessly printed by central bankers or other insiders, as in the case of the U.S. dollar, manipulated by the printing press.
The next level, from this solid foundation of sound money, is the free and voluntary exchange of goods and services for this currency, which we call free markets.
From free currency to free markets
Free markets free of any government restriction, capital control, tariff, price control, wage control, and any other form of interference.
Companies have given us jet planes, modern automobiles, dishwashers, washing machines…
Today, it is impossible to design and manufacture a new jet plane with your friends in your garage. It requires the coordination of millions of people working on wing design and safety, avionics, flight controls, hydraulic and pneumatic systems, etc.
That is why the modern company remains the best mechanism to enable the creation and manufacture of complex modern objects such as computers or airplanes.
Of course, banks, big pharmaceutical companies, and food manufacturing companies, to name a few, heavily capture and corrupt many industries and companies of the modern fiat era.
But under a Bitcoin standard, where the federal government would be much smaller and less powerful, and would be unable to bail out industries or play favorites using its access to the printing press, they would capture much fewer industries.
Will people still want to invest in these stocks?
Companies will continue to exist even under a Bitcoin standard, and their stocks will still be listed on the stock exchange because companies remain one of the best tools ever developed to help coordinate human activity in a useful and productive way.
Will people still want to invest in these stocks?
Very likely.
It is plausible that even Bitcoiners themselves will use their bitcoins to fund, for example, life extension companies, space exploration companies, or artificial intelligence companies.
And when the world adopts the Bitcoin standard, Bitcoin will gain purchasing power not through new adoption as today, with new people adopting Bitcoin and holding it as a reserve asset, but rather at a much slower pace that accounts for civilizational progress and productivity gains.
Therefore, Bitcoin will not kill stocks, but it will restore their value. So, it makes sense to bet on both Nvidia and Bitcoin, and this financial strategy is not incompatible at all.
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Chaque jour, j’essaie d’enrichir mes connaissances sur cette révolution qui permettra à l’humanité d’avancer dans sa conquête de liberté.
