Money and Bitcoin

It’s fascinating to see an asset class going up from zero to $2T in a little over a decade.

It’s even more fascinating to see $1T swing up and down by 25% in a few hours.

From the title of this post, you should have guessed the asset class I am talking about is cryptocurrencies and Bitcoin.

I am neither a Bitcoin bull nor a Bitcoin bear. I am just a curious student trying to understand this space better.

While learning about Bitcoin, I realized that my knowledge of money and all the concepts surrounding it was shallow. I didn’t fully understand how money gets created in the first place. I didn’t understand how central banks controlled interest rates. I didn’t understand why most money failed to retain its purchasing power over time.

I spent time educating myself on all things money. I am not an expert in this subject. But I am happy to see that my knowledge on this topic improved a little more than it was before.

This post contains 2 presentations.

The first presentation is from me. I talk about different kinds of money from stones, glass, metals, gold, and fiat money. I talk about fractional reserve banking and how money gets created by the central banks. I discuss how central banks control interest rates. From the presentation, I had to edit out this scene from the movie The Shawshank Redemption as it could result in copyright violation.

The second presentation is from my good friend Lin Yang. Lin talks about the critical building blocks that support all cryptocurrencies, including Bitcoin. He goes through the history of Bitcoin, and shares some of his experience running a crypto startup. Finally, he shares his thoughts on the future for Bitcoin.

Here is the presentation slide with speaker notes. Here is the workbook that I used in the presentation.

4 thoughts on “Money and Bitcoin

  1. Thanks, Jana. Both the presentations were very good.

    A thought was running in my mind when I was reading the presentation slides.

    Harari writes this in his book, “Fiction has enabled us not merely to imagine things, but to do so collectively. We can weave common myths such as the biblical creation story, the Dreamtime myths of Aboriginal Australians, and the nationalist myths of modern states. Such myths give Sapiens the unprecedented ability to cooperate flexibly in large numbers.”

    When dollar printing started in 2007 and bitcoin in 2009, almost none of us believed in them. But in the last few years, many of us actually believe in both of them.

    What happened with religions, corporations, and nations, can’t that happen with money printing and crypto?

    If yes, what will be the consequences?

    Disc: limited understanding of macroeconomics and almost zero knowledge of crypto.

  2. Hi Ankit,

    Glad to know that you liked both the presentations.

    Thanks for sharing the excerpt from Yuval Harari’s book.

    Money printing isn’t a new concept. It has happened multiple times in most countries. Often, it leads to hyperinflation, and the currency becomes worthless. If inflation starts going up, we can expect central banks to stop printing and raise interest rates.

    Will inflation go out of control? I don’t know. Focus on what we can control. Invest your surplus in assets that produce cashflows. It could be equities, real estate, or anything else that one is comfortable holding and sleeping peacefully at night. Have cash that you need for emergencies.

    Cryptocurrency is a new phenomenon that came up in the last decade. Most people on the planet might not have heard this term. Even if cryptocurrencies go to zero, nothing much will happen to the main street. That’s my guess.

    Regards,
    Jana

  3. Hey Jana,
    I got to know you from the FLAME university talk on smart notes. Thanks a lot for that wonderful video!
    I started writing blog inspired from you last month and I wrote my first blog along the similar lines : https://unbeatencoder.wordpress.com/2021/05/16/blockchain-cryptocurrency-and-valuations/ titled Blockchain, cryptocurrency and valuations. I have experience of 2 years of research in blockchain in undergrad and will probably work on blockchains in my masters next year at CMU. I had started writing the block with concept of money that I learnt from macroeconomics course that I saw on YouTube last month, and in the end after brainstorming reached something that is written in the above blog. I loved this frame of reference of looking at cryptocurrencies as a transaction processing business and found rationale that was more soothing to help me sleep at night and stay away from craziness. Would love to hear your feedback!
    Thanks for this wonderful article!

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