Bitcoin today is like the internet in 1999, says Scott Dedels, president of Paramount Employee Benefits & Pension Consulting.
Bitcoin today is like the internet in 1999, says Scott Dedels, president of Paramount Employee Benefits & Pension Consulting.
“If you could imagine knowing what the internet in 2020 would be like in 1999 and trying to explain to people how important it was going to be, a lot of people would tell you that they can't see how their business would integrate things like social media and all these things that didn't exist yet.”
The internet hit about 100 million US users around 2000/2001. Today, there are about 147 million users globally. Based on the adoption profile, it looks like by 2025, over 1 billion people will be using bitcoin on a regular basis.
If bitcoin doesn't “break, it's hard to imagine any other government currency existing within 30 years and, using the internet analogy, as the software changes its adoption could speed up,” he said.
Basically, bitcoin is software money. It has a fixed supply which make it usable or advantageous for everyone who uses it.
In fact, he said it may be anti-inflationary. One of the reasons for inflation today is the never-ending expansion of the money supply. Permanent expansion is a mandatory feature of the way the current monetary system works.
Bitcoin works against this because the supply cannot be expanded. There is a permanently fixed amount of bitcoin so the likelihood it will become more and more valuable over time is what people are starting to understand. “As subsequent technologies come in making it more usable and more interactive, Gresham's Law will come into play,” said Dedels. “This says basically that the market will self-identify a superior money over all other monies and it will hoard the good money and get rid of the bad. The bitcoin network has the advantage of having principles that no one can alter and it is going to be superior.”
Despite this, he doesn’t foresee retirees getting their pensions paid in bitcoin for at least 50 years. Still, over the next five years, there will be more requests for accommodation of partial salary paid in bitcoin. “You'll see C-suite executives want 10% of their wages in it.
“We'll also start to see business really looking at bitcoin as a payment option because, for example, the merchant fees are much lower. It's 3% on VISA transactions and it's pennies on a bitcoin transaction. These will help bring it into the mainstream,” he said.
It also makes sense as an investment for employer sponsored retirement plans.
“Bond markets face serious headwinds and the 60/40 portfolio balanced portfolio returned its worst year in 80 years last year. However, bitcoin is up 70% this year and a lot of people believe if it continues this pattern, it will go on another boom cycle. It's already the best performing asset ever and the best performing asset over a 10-year period. Institutional asset managers are going to get small allocations. “If you have something that's going to do a 50 times return, you only need to have 1% of your portfolio allocated to, for example, a target date fund. Instead of 60/40, it becomes 60/39/1,” said Dedels.
“These are the kinds of things we'll start see.”
