One of the most common criticisms of Bitcoin I hear is that it sounds like a cult or religion. I believe that the religious element of Bitcoin is a feature, not a bug. In fact, I would say the single final financial backstop that gives Bitcoin “value” is its religious adherents. To begin, however, we need to understand what religion means in the context of the True Bitcoin Believer.
The Oxford Dictionary defines religion very simply as a “strictly adhered to set of beliefs and rituals”. Beliefs and rituals are familiar to us in traditional religious contexts, but what are the beliefs and rituals of a Bitcoin believer? Like traditional religions, many of these beliefs and principles are laid out in a revered holy text. Bitcoin’s “holy text”, the white paper, lays out all of the beliefs that underpin Bitcoin - some that aren’t even “beliefs” at all, such as the code base and the 40 years of computer science and mathematics that built up to and underpin it. I can try to sum up the main beliefs that can be gleaned from the white paper:
- Bitcoin is voluntary. Voluntary approaches are always superior to mandatory ones.
- Bitcoin is open. Maximum transparency allows for a maximum number of eyes looking at the code and sharing ideas. Individual entities have no chance of competing with this.
- Bitcoin is fair. It cannot be created out of thin air or forcefully seized or redistributed. You must expend work in order to acquire bitcoins.
- Decentralisation is always preferable to centralization when it comes to money (and most other things).
- Everyone has the right to send and receive value, without a 3rd party, no exceptions – even for people we dislike. Either everyone is free to transact, or no one is.
- That a deflationary, fixed supply asset is the superior money (21 million coins only).
- Everybody in the world should be able to easily and cheaply keep a copy of Bitcoin on their person or at home, for maximum inclusion.
- If you do not voluntarily hand over custody of your private keys, your Bitcoin cannot be taken away from you. Ever. It is almost impossible not to get a religious tingle down your spine when you realise the implications of impossibility of seizure.
The main thing that requires belief or faith is whether or not the above economic and social philosophy and beliefs are actually correct, and that in time, will also appeal to others. We also, for the first time in history, have a chance to put our money where our mouth is regarding our social, economic and political philosophy – and so far, it’s been to the tune of over a trillion dollars, and quickly becoming a political force. We will talk about “money where our mouth is” when we talk about the second element of “dictionary-defined” religion – the rituals.
Just like any religious person will keep one or several copies of their holy text at home, Bitcoin believers keep a copy of Bitcoin’s blockchain at home too – this is called “running a node”. By keeping a copy of the ledger at all times, you can be 100% sure that all of your transactions are valid, without having to rely on anyone else for the truth about your balance. Over 100,000 people are running bitcoin nodes (only costs around $300 for dedicated hardware, but is completely free if you have some free space on your laptop), however, the true count is impossible to know due to the inherent privacy built into Bitcoin. As long as one node exists, anywhere in the universe, Bitcoin will exist. A great traditional religious example of this is the millions of Muslims who have memorised the entire Quran, even filling stadiums for yearly international Quran recitation competitions since the 1960s. Should all hard-copy Qurans miraculously disappear tomorrow somehow, the global Muslim community would be able to reproduce a perfectly accurate replica within a few hours, with several tens of thousands of eyes available for reproduction and peer review. Next time somebody asks you “Will Bitcoin go to zero?”, ask them “Will Christianity go to zero? Will Islam go to zero?” It actually sounds quite silly when you put it that way…
Another ritual that is common to traditional religions is “the tithe”. All Abrahamic faiths have some form of obligatory charity or tithe that must be given. In some cases, it’s a proportion of your income, say 10% as is the case of Judaism or Christianity, or a portion of your wealth on a yearly basis, as is the case for Islam. The point of the tithe or charity is that good deeds on earth need some form of money to drive them – it can’t all be divine intervention. The Bitcoin believer sees saving their money in Bitcoin, and becoming a relentless force of permanent demand, as the greatest act of charity possible. Should their economic and social philosophy be correct, this could ultimately mean world peace through the return to a fairer, more inclusive economic system. Failing that, they would at least be holding the greatest money known to man. There are now several services that provide the tither a way to automate their purchases (daily, weekly, monthly), to the extent where just one of them, Square, transacted over $1.8bn worth of Bitcoin in Q3 2021.
Why are these “cultist nuts” so confident in just blindly buying daily? The below table is eye-watering to many involved with legacy investments, but is considered the only rational, responsible and conservative investment approach by “cultist nuts”. Looking at the numbers over a long time period, there are little to no arguments that can be made by critics. The below table assumes that an investor commenced purchasing on a daily, weekly, fortnightly or monthly basis, starting on March 18th 2014, eight years ago as of date of this writing, when the price of a bitcoin was US$614.44, or any of the subsequent March 18ths since. Total growth over this 8 year period was 6,656%. It should be noted that the price of Bitcoin on March 18th 2022 was US$40,897, down approximately 41% from its November 9th 2021 high of US$69,000.
Long-term DCA CAGR % Data
(As at 18/3/2022)
So, how many “tithers'' are out there? It’s hard to know for sure, but we do know that the daily inflation of Bitcoin is currently 900 BTC. At a price of USD$40,000 per bitcoin, this is $36m of inflation that needs to be absorbed daily to maintain the price. This scales up to just under US$13.15bn per year. Considering the fact that Elon Musk recently managed to increase his personal wealth by a record-breaking $37bn in one day, $13.15bn per year is obviously a pittance in the scheme of global wealth and economic stimulus packages. $13.15bn equates to a mere 3.6 million adults saving just $10/day in bitcoin - only 0.07% of the world’s ~5 billion adults. Crypto.com estimates that there are about 176m Bitcoin owners worldwide (~2% of global adults) as at the end of 2021, but obviously, there are varying levels of zealotry. Although we have to settle for saying “imagine when the 0.1% becomes 1%” on the demand side, we do not have to imagine or “believe” in the daily supply, because it is guaranteed by the code. We can see with our own eyes that the daily supply will halve in 2024, then again in 2028, then every ~4 years until 2140, so, the 0.1% doesn’t even need to become 1% for the demand to outstrip supply. So long as the 0.1% remain committed to their religion and steadfast in their tithe - it is simply a matter of time.
Come home to the hard money monastery, I say – it is peaceful here - almost like playing life on cheat mode. Careful though, you can check out any time you like, but you can never leave.
Head of Research
Monochrome Asset Management