Bitcoin’s Role in the Great Wealth Transfer
An intergenerational dance of 60 trillion dollars is underway, and this is the amount millennials are getting ready to bank on as they start to inherit their parents’ wealth.
Baby boomers have been the most successful generation in terms of wealth accumulation. Those born between 1945 and 1964 have amassed, on average, ten times more wealth than millennials born between 1980 and the mid-90s. But this is about to change.
As of today, the Silent Generation — the parents of the Baby Boomers — and boomers still lead when looking at wealth demographics. According to Federal Reserve data, between both generations, they still hold 65% of all wealth in US households, while millennials scratch a meager 5,9%. However, if we zoom out and look at the big picture, we’ll see a clear trend of how the great wealth transfer is starting to pick up. Ten years ago, the Silent Generation and boomers together held 88% of all wealth, while millennials’ holdings were below 1%. The so-called Great Wealth Transfer has been going on for a while now and will continue to develop over the next two decades. As expected, millennials will inherit their parents’ wealth in the form of a variety of assets, including bonds, retirement accounts, stocks, real estate, or gold, to name a few.
The composition of their wealth is the result of the economy they grew. Baby Boomers were the first generation to face the consequences of growing under a fiat monetary regime when US President Richard Nixon announced in 1971 the end of the gold-backed dollar and inaugurated a (new) era of fiat money. Ever since, inflation has made the US dollar useless for those saving for retirement or future generations. The new monetary regime forced baby boomers to switch from “savers” to “investors” to preserve their wealth.
And with the US dollar out of the question as a long-term store of value, they switched to other assets such as real estate, bonds, stocks, commodities, etc. Houses, for example, are no longer only a place to live but a way to preserve wealth. The price of all of these assets now includes a monetary premium that reflects their utility as a store of value.
Consider the real estate market, prices had skyrocketed six-fold since 1981, when the first millennials were born, while the growth of wages lagged behind. Now everyone has to become a yield seeker looking for a yearly return just to protect their wealth, whether large or small. The alternative is to look at how cash gradually loses its purchase power.
Millennials, amid a more complex economic environment, with near-zero or negative interest rates, will face the decision of how to manage their wealth. And their worldview is radically different from their parents and grandparents.
The Fiat Generation
Unlike previous generations, millennials have grown, studied, and started their work-life in the era of money created out of thin air. This is a radically different economy from the one their parents grew up in. Millennials have seen the public debt grow as ever before. And with it, their own student debt has reached a record level of $1.6 trillion. Thus, it’s not surprising to read polls pointing toward the pessimistic attitudes that prevail among millennials worldwide.
This heavy burden means that the average millennial in the United States starts their adult life with a negative net worth. According to a report published by The College Investor, an average 29-year-old millennial has a net worth of -$6,168, and by the time they are 32 years old, they start to be in the black.
This context may explain why millennials are a generation that distrusts governments and traditional institutions. It’s not a surprise. They began their working lives in the middle of the Great Recession. A harsh welcome, albeit in line with the boom and bust economic cycles that characterize fiat monetary systems.
Millennials are also the first generation of digital natives and the first to grow up under the influence of the internet, social media, and later smartphones. They are the main demographic behind fintech adoption and have known digital money since they were born. Without a doubt, it is the generation that is most prepared to understand Bitcoin, at least much more than their parents and grandparents.
Bitcoin: An Intergenerational Opportunity
Distrust in institutions and their grasp of the digital world could make Bitcoin one of the favorite assets for millennials to store their wealth.
Furthermore, many millennials are already holding Bitcoin. According to CNBC, some 83% of high-net-worth millennials stated they hold Bitcoin and plan to add more this year.
“Bitcoin can be described as an aspirational store of value-creating value as it matures into a store of value”
— says an investment thesis published by Fidelity.
Bitcoin’s immutability, censorship and seizure resistance, liquidity, and verifiability of its supply are a perfect match for millennials’ values.
As more and more young adults inherit their parents’ money, we’ll naturally see more Bitcoin adoption. Not only those trillion dollars will change hands over the next two decades, but Bitcoin will also continue its consolidation as a monetary asset.
While the Great Wealth Transfer will resemble the current global wealth distribution, with the wealthiest 12% inheriting over 85% of the assets, the emergence of Bitcoin as an attractive monetary network for long-term store of value has leveled the field. For the first in the history of intergenerational wealth transfer, everyone has a political and economic asset. No matter where they live, how much money they have, or their political connections.
For the first in the history of intergenerational wealth transfer, everyone has a political and economic asset. No matter where they live, how much money they have, or their political connections. The consequences of the Great Wealth Transfer will impact many areas, and Bitcoin will play an essential role in it. Billions of dollars now tied to traditional assets that carry monetary premiums will move to a superior, more resilient monetary network. This will impact the Bitcoin price, and we will witness that gradual process in the next two decades.
As the world moves towards an environment with increasing financial repression, loss of privacy, and the launch of central bank digital currencies, millennials will find more reasons to preserve their wealth in Bitcoin.
Maybe, unlike their parents, they can become savers again.
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