Bitcoin has always had the potential to become the world standard for money. Even if the blockchain powering bitcoin lacks the bandwidth to handle the amount of transactions needed, and even if the world was not ready 11 years ago for non-government e-money to go mainstream, the potential is still there. Always was.
Indeed, bitcoin enthusiasts and developers have long stressed that the day will come when bitcoin will stand alongside gold. Back in 2018, Twitter and Square CEO Jack Dorsey insisted that bitcoin would become the world’s single currency.
What the visionary Milton Friedman predicted about bitcoin in 1999.
Even before bitcoin became a reality, visionaries like Milton Friedman were predicting the rise of an Internet-version of cash, as long ago as 1999.
“The Internet is going to be one of the major forces reducing the role of government,” he said at the time. “One thing that is missing but will soon be developed is a reliable e-cash, a method where you can transfer funds over the internet without A knowing B or B knowing.”
Milton Friedman’s statement is precisely why finance commentators such as Vice News creator and The Wisdom of Crowds author James Surovicki are so skeptical about bitcoin going mainstream.
“Our economies and financial systems are built around fiat money, and they allow central banks to control currency (and issue loans in that currency) to help manage business cycles, fight unemployment, and deal with financial crises. government capacity),” Surovicki wrote in spring 2018 when bitcoin hype was at its peak.
Could bitcoin be the dominant economic currency?
“An economy in which bitcoin was the dominant currency would be a more volatile and rigid economy, in which the government would have limited tools to fight a recession and where the financial panic, once started,” he continued, “will be difficult to stop. ”
Still, two years later, signs are positive that the significant disruption of the novel coronavirus may be doing what little else has done so far: give an additional push to accept bitcoin as a reserve currency.
The macroeconomic moment we are in currently represents a serious opportunity for use cases for bitcoin. Let’s take a look at some of the major reasons.
Corona is leveling the playing field
Against long-standing currencies such as the dollar and pound sterling, bitcoin feels new and untapped. But the venerable fiat currencies are crumbling.
Currency collapse, of course, is nothing new – it has all happened before. As recently as 2017, when Bolivar collapsed, many Venezuelans adopted cryptocurrencies for their transactions. Previously, the Zimbabwean dollar and the Argentine peso saw hyperinflation which prevented them from operating as legitimate currencies. The Icelandic krona suffered a similar fate after that country’s financial collapse in 2008.
Finally, 1971, when the gold standard was finally abandoned, was the beginning of the end for fiat currencies. For decades, central banks have reacted to economic threats by printing money and lowering interest rates, gradually creating a massive debt bubble that eventually led to the 2008–9 crisis.
Despite warnings, their strategy has not changed, making fiat currencies more inflated and ready to pop.
The coronavirus crisis has dealt a major economic blow, which these currencies cannot cope with.
We are witnessing a sudden reduction in both supply and demand and a cut in international trade which has almost brought the global economy to a standstill. In response, the US Federal Reserve, the Bank of England and the European Central Bank (ECB) increased their quantitative easing plans and brought interest rates even further down to 0% (or down in the case of the ECB and Japan).
In the absence of a gold standard, it is unclear which fiat currencies have depreciated against them.
We could also argue that they reduced the value against bitcoin because it reflects the real market value of the currency at any given time. Some staunch supporters, including the author of Rich Dad Poor Dad, claim it is the only true hard money.
While the insight into the issue is hardly universally accepted, bitcoin is increasingly viewed as “harder” than fiat currencies, which are manipulated by central banks.
Indeed, if bitcoin’s resistance to manipulation by central bankers ever made it impractical, today, this stand seems like much more a convenience than a bug.
With fiat currencies in disarray and central banks on the backfoot, we may see either a return to old financial ideas considered safe and stable, such as the gold standard, or the acceptance of radically new ones such as bitcoin that now exist. Doesn’t appear unattractive.
When the Internet Rules, E-Cash Is King
Until now, the decentralized nature of bitcoin was one of its disadvantages. It was seen as chaotic, disorganized and unreliable and no one was officially “in charge”. Current period interest rate rigging and quantitative e. refers to.