Money has become a concept that has changed over the course of human history from bartering system, to coins, banknotes to digital currencies. In the few years Bitcoin has existed, it has become the world’s first decentralized cryptocurrency, now a revolutionary form of money that will fundamentally change the way we think about wealth, and storing and using value. While Bitcoin’s innovation is its technological innovation, Bitcoin is also changing the way we think about money in terms of independence, security, and long term wealth creation.
In this article, we will look at how Bitcoin changes the way we see money and wealth and how this new paradigm challenges the old way of thinking about money and force us to think about value in a new way.
The Shift from Physical Wealth to Digital Wealth
Gold, silver, or even physical currency was a form of wealth you could touch and feel for centuries. People had a sense of security because they could touch and count their wealth in tangible form. But with Bitcoin, wealth is more and more something digital. Bitcoin is purely digital and unlike cash or gold, it doesn’t really exist anywhere but on a decentralized blockchain network.
The move from tangible to intangible wealth has led people to reconsider what value and money actually means. Bitcoin does not have any backing from a government or central authority; its value comes from the trust and consensus of its users. With more people adopting this new decentralized way of currency, the psychology of wealth is changing to accept it’s possible to store and transfer value in purely digital forms, without physical assets.
The Idea of Scarcity and Thinking for the Long Term
The scarcity that Bitcoin offers is one of its core principles that make Bitcoin unique. By contrast, Bitcoin is not a fiat currency, and central banks can’t print it at will (although fake versions can always be created). The limited supply of Bitcoin makes it a deflationary asset, in contrast with (fiat) inflationary currencies that lose purchasing power over time.
Due to this scarcity, we focused on a more modern way of thinking about wealth preservation and accumulation. In the traditional financial system, it’s usually encouraged that if you want to avoid your money losing value to inflation, you need to either spend the money or invest the money. However, the fact that Bitcoin is scarce lends itself to a ‘HODL’ mindset (a slogan popularized in the Bitcoin community, meaning to hold onto one’s Bitcoin for the long term) for many, because you anticipate a rise in the value of Bitcoin over time owing to its finite supply.
The psychology of scarcity is one reason why many people see Bitcoin as ‘digital gold’. Like gold that has been considered a store of value for so long because of its rarity, Bitcoin’s limited supply plays the same long term wealth preservation role. This has spawned a group known as “Bitcoin maximalists,” who think that Bitcoin is the ultimate store of value that, if held over the long term, will result in the accumulation of vast wealth.
The Financial Independence and Sovereignty
Bitcoin offers something that traditional financial systems cannot: true financial independence. Bitcoin means that your money is your money, you are your bank, and nobody can take your money away from you and you don’t have to rely on someone else to do security for you. The appeal of this level of sovereignty is strongest for people living in countries with unstable economies, oppressive governments, or hyperinflation — where traditional money becomes quickly worth less or is barely available.
Many people have redefined the idea of wealth thanks to this sense of financial empowerment. In the old system, wealth is usually associated with external things like banks, stock markets, or government policies. In contrast, Bitcoin allows people to be their bank and in this way, control their financial future. With this shift in the way people pay, there’s been a new wave of financial self reliance, where people are now taking control of their own financial security, owning and managing their own Bitcoin.
To many, Bitcoin means freedom from the control of centralized financial institutions or governments. Deceived is a representation of decentralized wealth, it means you can store, send, or receive money without permission or supervision from any third party.
The Changing Relationship with Risk
Bitcoin has also changed the way people view risk in financial markets when investing in Bitcoin. Typically, things like stocks, bonds, or real estate are considered “safe” investments, since they are assets (or sometimes, even backed by the government). But Bitcoin’s price volatility gave many an impression of Bitcoin as a “risky” asset, particularly in its early days when price swings were massive.
Yet despite this volatility, many investors across the world have come to regard Bitcoin as a hedge for systemic risks in the regular financial system. For instance, Bitcoin makes for a great wealth preservation tool during times of economic uncertainty or currency devaluation due to its decentralized nature. This has shifted the way people take risk, some argue Bitcoin is a necessary diversification in people’s investment portfolios in order to guard against the impending financial crises.
Furthermore, with the rise of decentralized finance (DeFi) platforms, Bitcoin holders have gained exciting new ways to earn interest or provide their Bitcoin as collateral to secure loans, making the distinction between traditional finance and cryptocurrency increasingly difficult to define. It creates a new landscape of more calculated risks people take with wealth that was impossible before.
The Future of Wealth: Decentralized and Digital
In light of Bitcoin’s ongoing adoption, we can see that the psychology of money and wealth is deeply changing. Bitcoin subverts the conventional paradigm of storing value, saving up wealth and managing risk. Its decentralized nature brings a new level of financial sovereignty, its scarcity and deflationary properties help create long term thinking about wealth accumulation.
For others, Bitcoin is the future of money: freedom from the tyranny of physical assets and central authorities to dominate personal finance options and allow individuals to exercise their own control over their financial destinies. The more people adopt Bitcoin, the more it will reshape how we think about wealth, a mindset of financial independence, long term planning and decentralized control.
Finally, Bitcoin is not just a digital currency, it is a change catalyst for how we perceive and interact with money. It undeniably influences the psychology of wealth, and as it spreads, Bitcoin will continue to challenge and reshape the modern world’s financial norms.
