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- Investing in Bitcoin?
- Is BTC investment rational?
- What is the opportunity cost for BTC investment?
- Is it worth delaying gratification Holding BTC?
- Think for yourself.
Saylor Academy: “Medium of exchange: When money is fully established as a store of value, its purchasing power will stabilize. Having stabilized in purchasing power, the opportunity cost of using money to complete trades will diminish to a level where it is suitable for use as a medium of exchange.
In the earliest days of Bitcoin, many people did not appreciate the enormous opportunity cost of using bitcoin as a medium of exchange rather than as an incipient store of value. The famous story of a man trading 10,000 Bitcoin (worth approximately $94 million at the time of this article’s writing) for two pizzas illustrates this confusion.”
For those who do not know: In 2010, a man named Laszlo Hanyecz traded 10,000 credits of the cryptocurrency for two large pizzas from a Papa John’s location in Jacksonville, Florida – which would be worth about $613 million in 2021 dollars
Rationality of investing in Bitcoin: A rational investor is asked would you like to get $5000 now and $5000 after two years; obviously, the answer will be now. The value and utility are more for money received now than at a later point in time.
Investing in Bitcoin means you are set to delay gratification you would have otherwise enjoyed using your money now.
Why should we delay gratification? The ability to hold out now for a better reward later is an essential life skill. For instance, delayed gratification allows you to do things like forgo large purchases to save for a vacation, skip dessert to lose weight, or take a job you don’t love, but that will help your career later on. Delaying gratification is a strategic factor in decision-making and is an essential part of emotional intelligence.
Why should we pay opportunity cost? “Opportunity costs” represent the potential benefits missed out when choosing one alternative over another.
When choosing between “receiving money now and later,” opportunity cost should be considered. Choosing one investment over the other is a situation where you are paying the opportunity cost.
In simple terms, “A farmer chooses to plant wheat; the opportunity cost is planting a different crop or an alternate use of the resources (land and farm equipment).”
Paying an opportunity cost when you invest in Bitcoin: Practically, opportunity cost is the profit lost when one alternative is chosen over another. The cost of one item is the lost opportunity to do or consume something else. The “opportunity cost” of a resource is the value of the next-highest-valued alternative use of that resource. If, for example, you spend time and money going to a movie, you cannot spend that time at home reading a book, and you can’t spend the money on something else. Think for yourself. DYOR.
