Bitcoin Fares Well Against Fiat Currencies, but It’s in a Class of Its Own

Bitcoin as a currency

“In the long run, I could not find any meaningful (>0.5) r-squared value comparing it to other assets. I believe that BTC will further continue to gain traction as a non-correlated asset, and become a genuine member of the liquid alternatives asset class.”

“Governments are constantly printing more money, but bitcoin has a fixed supply (no more than 21 million bitcoins will ever exist). Scarcity creates demand, ensuring that bitcoin will tend to gain value over time, unlike fiat currencies whose long-term value tractories are more unpredictable.”

A closer look at Bitcoin’s relationship with premier fiat currencies

“Some experts misguidedly confuse price with purchasing power, i.e., they believe that a currency’s purchasing power is directly expressed by its USD value. In fact, Bitcoin’s purchasing power has risen as steadily as the dollars’ has fallen. Since the start of the 20th century, a single dollar’s impact on the material flow of goods and services in the world has steadily declined. Bitcoin’s impact on wealth and the flow of capital is becoming more powerful every day, as the engineers and entrepreneurs in our space continue to build out its spending infrastructure.”

“Everyone knows well that the value of $1 or €1 was worth much more in the 1990s than it is today. BTC is only a decade old, if on May 21, 2011, one could buy a pizza for 5000 BTC, today those same 5000 BTC are worth $30,000,000. Many savers who have bet on FIAT currencies would be very happy to have been able to take advantage of such an appreciation of their savings.”

“I don’t really agree when Bitcoin is compared against fiat currencies. Bitcoin might act like money but it is far bigger than this, hence its value and volatility. Money is merely the first ‘app’ for Bitcoin and we have yet to witness how revolutionary this technology will be in changing many different industries. Fiat currencies all have to be more or less strong but as we have seen over the past decades, government-backed money is becoming more and more suspect and as a result, people have begun to really lose trust in it.”

Bitcoin’s volatility compared with traditional fiat assets

“One Bitcoin always remains one Bitcoin. Same thing is with other fiat currencies. But the problem is we don’t get to see the other parameter to measure the value of USD (as in we don’t know what is it backed by) since governments don’t disclose the other side. Hence we think one dollar is still one dollar in terms of its face value, not the actual value. The actual value is badly manipulated. Recently, trillions of dollars were pumped in due to the crash, where do you think they are getting all those dollars from?”

Why do people still trust the traditional banking sector?

“These bubbles have now caught the attention and people are more aware of how manipulation is being done by central banks. Bitcoin is deflationary or a stagnant system. as there is no new printing of BTC. The Alfred Marshall (father of economics) is yet to be born for the decentralized world. Very soon this economic aspect of the Bitcoin-led economy will be recognized.”

“Thanks to their dollars, people can fill up their shopping trolleys, the petrol tank of their car. They cannot do this directly with Bitcoin, it is this capacity of FIAT that gives them their confidence. If tomorrow, and this will be the case, the masses find themselves extorting from their savings ([i.e.,] war effort against coronavirus), that their money no longer allows them to consume as before, they will turn to a system that does not allow this kind of excess, BTC will then make sense.”

Looking ahead

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store