The narrative presented by Bitcoiners is that Bitcoin’s dollar value rises in the face of inflation, and inflationary practices. Yet, Bitcoin seems uncorrelated not just with the typical assets of stocks and bonds, gold and other commodities. It seems to be uncorrelated with other currencies as well.
Bitcoin is an oddity. It is a currency/commodity, the only one of its kind in the current paradigm. It’s in its own kind of 4th dimensional world.
There’s the fiat reality where all currencies the world over are inflated, bound to the petrodollar, which at this point in time is the US Dollar. All other currencies circulating like constellations around the biggest north star economy/marketplace of the world: the US.
If China, for example, sees the US dollar machine printing away in the trillions, they soon will follow. They will print renminbi, and buy US Debt instruments — Treasury Bonds — and as many dollars as the US prints. In order to keep their products competitively priced in the market that matters: The US market.
Everything is relative
And how will other markets respond? They too will crank up their presses, they too will inflate in tandem with the US, trying to keep their heads afloat with the rising tide of money — yet doing their best to not overdo it.
Their thinking goes: as long as world fiat currencies rise together in tandem, then equilibrium is achieved, and disaster is averted. Runaway hyperinflation is avoided, as everyone benefits from both the inflows and outflows of goods and services marked up equally across the board.
Prices rise, yet wages rise as well.
It’s only when a country such as Venezuela, or Zimbabwe out-inflate the US Dollar where the bugaboo of hyperinflation rears its ugly head. Central Banks were invented for this, and the IMF takes out the outliers.
Where does that leave Bitcoin?
Bitcoin is the red-headed stepchild of currencies.
Not controlled nor produced by a Central authority, consisting of an artificial commodity that is electronically mined, and not typically used for day to day transactions — it stands outside the current economy neither affecting, nor being affected by the machinations of the other world currencies.
So, when all the other currencies inflate by cranking up their printing presses, non-US countries buying up the dollars to be able to settle their debts, and buy petrol, keep their products competitive — what does the Bitcoin do?
It doesn’t do anything in regards to the economies of the world.
Instead, like clockwork, the heartbeat of bitcoin releases a new block of verified transactions every 10 minutes, halving blocks produced every 4 years, oblivious to what’s going around it.
Because it really isn’t a part of the current world economy. It couldn’t give a damn.
It’s only when fiat fails will Bitcoin reach its potential
Bitcoin is aptly called an escape hatch.
But inflating fiat is never a failure for the haves, only for the have-nots. Rising prices always benefit the ones with homes, other real estate, land, businesses, and commodities. The ones who actually own things that inflate with everything else have no worries.
It’s only the poor, such as the homeless in coastal US cities who cannot afford a place to live and who get increasingly priced out of the market. They can’t afford a home, so they are forced to opt out.
The sidewalk becomes their home.
While those who have scraped together enough from their inflated salaries to at least rent a simultaneously inflated home make their gingerly way around their newly growing obstacles of tent cities, and unwashed sleeping bodies.
Only when fiat fails, which will conceivably take a catastrophic catalyzing event, will bitcoin takeover as a currency. Otherwise the world may hobble on as best it can — continuing to inflate and reinflate their economies.
Bitcoin may never be the vaunted world changer proponents say it is destined to be. It may simply stand in stark contrast to it.
But, the Halving!
So, we have this geek money here, whose value is only in reference to what is used in the regular economy. $6,800 and change at current values, creeps inexorably to a 3rd Halving event, when the number of blocks produced gets reduced from 12.5 down to 6.25. Since its value is only representative, and usually pegged to the US Dollar, for example, the value is only what we give to it.
It’s somewhat in its own universe as a sorta commodity, not used as an active participant in the world economy — kinda off doing its own thing, if you will.
No Central Bank uses, stores, or trades with it
I believe it will eventually be used, but that could be years, or even decades. And relative value assigned to it, be it $6,800, or $100k or $1 million per could simply be a side market — like artwork for the super rich.
Like, who owns a bar of gold?
Not everyone can afford a bitcoin, and if models hold, eventually only for the decadent dilettante with a cool mil of lazy cash burning a hole in his/her fiat bank account. Whoo-hoo, I own one bitcoin!
Good for you.
And while being pegged to the fiat system may float its relative value in its parallel value system, it’s not a reflection of its inherent value, only a comparison value.
It may never achieve its hoped for fiat-killing status.
The hope of the Bitcoiners are that bitcoin will stop being seen as a sideshow, and actually be seen as the REAL THING.
Not just a gleam in a trader’s eye, hoping for a richer S2F tomorrow of an ever-pumping BTC, an actual in use currency. A return to hard money. La Dura Dura of money.
Instead: an inflationary benefactory of a sideshow currency curiosity whose winning thesis is that it beat the double-spend problem, oh — and the absolute rarity problem.
Academic kudos to you, sir.
Still not used in commerce — so what?
If a tree falls in the forest…
Paintings by world famous, and mostly dead artists can also be worth millions — does it also make them a suitable currency? Bad example — (I can hear the Bitcoiners screaming already!)
Hear me out: if bitcoin is never recognized, is never actually used as not just an alternative, but as a main currency on par with the ruble, renminbi, nay even the US Dollar, will it ever have sustainable value at all? Will it ever achieve its vaunted place in the celestial sky of currencies in use today?
Will it ever be the world changer we need, nay deserve?
The world economies may never use it, never recognize it. It may remain an oddity traded amongst a select few rich in-the-know geeks, and the enablers caught up in the hopium. As the fiat currencies continue their inflationary games, the rich getting richer, and the poor in increased despair, this may take years to play out.
The value of a Bitcoin may indeed rise to a cool mil, owned by a select lucky few - while the world continues to churn and burn. Go ahead, deposit yr money, and take yr chances. Bitcoin will very likely rise above yr wildest dreams.
You’ll still, in the end, exchange it for the dollar du jour.
.Nothing in this article is to be construed as investment advice. Neither the author nor the publication takes any responsibility or liability for any investments, profits or losses you may incur as a result of this information.