Apolitical Money
The price of bitcoin has crossed $40,000 for the first time since April 2022 and gold is in the midst of making new all-time highs. There are a slew of plausible explanations for this tandem of occurrences – the market’s lack of faith in the Fed’s ability to wrangle inflation, continued currency debasement, mounting national debt, an unsustainable trajectory of interest expense, increasing deficits, rising geopolitical tensions, banking system fragility, and the recognition that assets once perceived as “risk-free” possess both material price risk and counterparty risk – just to name a few.
The reality of the situation is that the recent performance of bitcoin and gold is a result of the combination of these factors, all of which share common undercurrents. Bluffs are being called. Counterparty risk is being more rigorously assessed. At a high level, individuals, institutions, corporations, nation-states, and everyone in between, are waking up to the notion that the optimal strategy for preserving value into the future is to store their economic energy in assets that cannot be debased, frozen, seized, or otherwise co-opted by forces outside of their control.
Economist Zoltan Pozsar (formerly of Credit Suisse) wrote a prescient note in early 2022 suggesting the onset of a new world monetary order (the birth of Bretton Woods III) and the shift from “inside money” to commodity-backed “outside money.” Another lens through which to view this emergent trend is as a growing aversion to assets subject to politicization, in favor of assets that are wholly apolitical. In a world where the motives & policies of authorities & institutions which influence asset valuations (directly or indirectly) appear increasingly dubious, the case for neutral, non-state assets grows stronger.
Bitcoin is Apolitical
A fundamental component of bitcoin’s value proposition stems from its inherent neutrality. There are a number of attributes of bitcoin that make it a unique asset, but one of the most important is its apolitical nature. Bitcoin has no central issuer and is not controlled by any unified authority. Similar to how the internet operates as a decentralized network, not controlled by any single entity, bitcoin possesses a similar foundation. As an open-source piece of software distributed across tens of thousands of computers all over the globe, bitcoin’s inherent resilience is a function of its underlying structure.
Bitcoin’s programmatic nature ensures that its monetary policy isn’t determined by fallible humans or shifting geopolitical sentiment. Instead, it’s rooted in the consensus of a decentralized network. This consensus is crucial; it means that any significant change to bitcoin’s protocol – including its monetary policy – would require agreement across a vast and diverse set of network participants, bolstering the system’s resilience and stability.
Furthermore, bitcoin’s monetary parameters are not merely established rules but hard-coded into the protocol. Its issuance schedule is programmed, known, and transparent. There will only ever be 21 million bitcoin. Every four years, the number of new bitcoin created and earned by miners halves, in an event known as the halving. This transparent and predictable scarcity stands in sharp contrast to traditional fiat currencies, which can be printed infinitely based on the whims of central banks and governments. Whereas central planners are known to dilute their currencies through excessive money printing, bitcoin offers a distinct alternative – a predictable and immutable monetary policy governing a pristine store-of-value asset.
The Nature of Politics
A common trope of contemporary discourse suggests that societal division and polarization are at all-time highs. For the past several years, a persistent narrative has been that “politics” have become embedded in all facets of life and as a populous, we’ve never been so divided on a wide array of topics and issues.
On one hand, this is patently false from a historical perspective – obviously there are several instances of extreme ideological division in this country, and globally, that far outweigh those of the modern era. However, it is worth unpacking why it may feel as though there is an unprecedented level of polarization today.
While we may not be at the peak of societal division in absolute terms, the key differentiator inherent to the modern age is the heightened awareness of our differences and underlying political motivations. The advent of the internet, the pervasiveness of social media, and the broad digitization of information have catapulted humans into an uncharted realm of sensory overload.
An increasingly interconnected global landscape has made us acutely conscious of divergent views and has allowed individuals to pull back the proverbial curtain, revealing the politicized nature of nearly all societal structures. Realistically, these structures which comprise society, such as government entities, corporations, and academic institutions, have always been politicized, we are now just far more aware of the various incentives at play and are better equipped to question or counter prevailing narratives espoused by these institutions.
Ultimately, politics are how humans attempt to organize and govern themselves. When a topic, issue, discussion or organization becomes “politicized,” it indicates that specific ideologies and affiliations have infiltrated a previously neutral, or apolitical, subject. In this sense, politicization can be viewed as the primary catalyst for polarization – particular opinions emerge and naturally manifest in the form of opposing forces.
Misaligned Incentives
While politicization is a natural reality of human interaction and coordination, it is critical to understand how those with power or influence over a given societal structure may be incentivized to exploit or disenfranchise their opposition or society at large. Moreover, it is worth considering whether some aspects of society should be defended as apolitical or neutral.
Those in positions of authority – across government, business, or academia – often have the opportunity to manipulate systems in their favor. This can manifest in less obvious ways, such as shaping public perception via media channels, or in more overt forms, such as implementing policies that disproportionately favor a particular group. The likelihood of this kind of exploitation tends to rise when political beliefs extend into spheres typically regarded as impartial or non-political.
Money is perhaps the most important example of a domain where the infusion of politics can have far-reaching consequences. For thousands of years, humans coalesced around an apolitical form of money – gold – which was governed by the economic reality of its monetary properties, as opposed to political agendas. Since the creation and proliferation of unbacked fiat currencies, however, monetary policy is no longer immune to politicization. The ability to manipulate interest rates, constrain free markets via regulation, or debase currencies at will, are typically influenced by political motivations rather than purely economic considerations.
Widening inequality, the erosion of trust in financial institutions, and broad economic instability are largely a function of our monetary system being wielded as a tool for political gain rather than the economic well-being of society as a whole. These factors not only impact the economic health of a nation but contribute to the division and polarization that we see today.
The Politicization of Traditional Assets
The modern financial landscape has experienced an unprecedented integration of political dynamics into traditional store-of-value assets. The seizure of Russia’s U.S. Treasury reserves in response to geopolitical tensions underscores a stark reality – national and international policies can directly influence the perceived security and stability of conventional financial instruments. This politicization extends beyond sovereign assets. The realm of public equities, traditionally viewed as bastions of market-driven valuations, now finds itself increasingly entangled with social, environmental, and governance (ESG) directives.
Another notable instance of politicization seeping into the domain of financial assets was the Canadian truckers’ incident in early 2022, where protesters had their bank accounts frozen by the Canadian government. This type of draconian response to the opinions and actions of individuals raised questions about the reliability of financial systems and the potential for government interference, even in democratic societies.
These developments are indicative of a broader trend – put simply, the value and stability of financial assets are increasingly susceptible to shifts in political climate and regulatory posture. The implications of such politicization include risks of debasement and loss of autonomy for individuals and stakeholders. In contrast to the politicized nature of traditional financial assets, bitcoin represents a uniquely apolitical alternative. Rooted in a decentralized and transparent framework, bitcoin operates independently of centralized financial institutions and political entities. This detachment is not merely a byproduct of its technological underpinnings but a deliberate design choice aligned with the ethos of financial sovereignty and resilience against centralizing tendencies.
Politicians Embrace the Apolitical
Despite its apolitical foundation, bitcoin has garnered attention and support from political figures who view it as a tool for combating the centralizing forces across the global financial system. Prominent advocates such as Javier Milei (the recently elected President of Argentina) and Robert F. Kennedy Jr. (the leading independent candidate in the upcoming US presidential election), have found common ground in bitcoin’s resistance to control and manipulation. This development presents an interesting paradox – political figures championing an inherently apolitical asset. On one hand, bitcoin’s design and philosophy stand in direct opposition to centralized control and politicization. On the other hand, bitcoin has become a symbol for politicians seeking to demonstrate their commitment to the ideals of freedom and personal sovereignty.
The groundswell of bitcoin advocacy from politicians stems from a recognition and appreciation of bitcoin’s core properties which promote freedom, autonomy, and resistance against the abuses of centralized power. While politicians can utilize bitcoin as a tool to curry favor with a populace disillusioned by traditional financial systems, the reality is that their advocacy has no influence over the network or the asset itself. Regardless of whether these political endorsements are a function of genuine alignment with the ethos of bitcoin or simply serve as strategic moves to garner support from marginalized segments of the population, the trend is both notable and likely to continue.
Looking Forward
The implications of an apolitical store-of-value asset governed by a neutral monetary policy are immense. By storing their economic energy in bitcoin, individuals can make long-term financial plans with a clearer understanding of the asset’s future value. Fears of unplanned dilution, or the erosion of purchasing power, are mitigated. Bitcoin’s promise is not just digital money, but a transformation in the way we understand and interact with monetary value. Its purity in terms of monetary policy is unmatched – bitcoin presents a vision of a financial system where value can be reliably protected and preserved into the future.
The innovation of bitcoin is both technical and philosophical. It challenges the status quo, asking society to reconsider what they value in a monetary good. Instead of placing trust in politicized institutions and human decision-makers, bitcoin proposes a system where trust is placed in transparent, immutable mathematics. This revolutionary approach redefines humans’ understanding of monetary policy and offers a new paradigm for a global store-of-value, free from the vulnerabilities of human error, intervention, and politicization.
The price appreciation of bitcoin is simply a function of supply and demand. Supply is known, immutable, and asymptotically approaching a static amount of 21 million. As an increasingly large segment of the global population recognizes the merits of an apolitical store-of-value, demand for bitcoin will continue to increase.
Increasing demand against a static supply is the recipe for a monetary revolution – vote not at the ballot box, but with your hard-earned currency units.