Bitcoin price declines ignore all the virtues it has in these turbulent times
Bitcoin: Every monetary system since ancient times has failed and created countless social catastrophes. But BTC is another beast that can save us all, says Steve Dubied from Consulfin.
BTC has fallen since inflation hit the headlines. Spokesmen have been promoting BTC as an ideal hedge against inflation for over 10 years. In reality, this argument is rarely mentioned in the current financial press. Has BTC lost its virtues?
As a reminder, the first cryptocurrency was founded to provide users with a currency that could not be manipulated and was not centralized in a governing institution. The issue is limited to 21 million units, 19 million have already been issued, more than 3 million are probably lost forever. And, and the additional 2 million to be issued will trickle down for the next generations.
Bitcoin is transferred instantly and securely through its technology. The fees are minimal, there is no intermediary who has the right to judge the transaction. BTC has no debt, unlike fiat currencies which accumulate expenses by refinancing through the bond markets. The network is becoming increasingly solid. This is because operations depend on the participants in the Proof-of-Work (PoW) consensus, which has grown steadily since its launch. Global energy consumption is negligible (0.16%) and renewable energy is mostly used for operations.
Due to its scarcity and reliability, it represents the ideal reserve value as well as an unparalleled safe haven due to its decentralization and instantaneous exchange anytime, anywhere.
For thousands of years, humans have been searching for such a preservative. Every monetary system since antiquity has failed and created countless social catastrophes. Inflation today is just one of many episodes since we found a name for it.
Bitcoin and the big diversion
Since the weakening of fiat currencies has occurred significantly in recent times, BTC has been transformed into a technological tool. It is compared to a Nasdaq-listed company that does not earn anything and is penalized by rising interest rates!
It is surprising to see that BTC has fallen as much as Netflix when the comparison is meaningless. The current management’s thoughts on BTC are absurd and ignore all the virtues it has in these troubled times.
Over the past two years, US inflation has risen by 0.12% in May 2020 to 8.58% in May 2022. At the same time, interest rates on Fed funds during this period have risen from 0.25% to 1.75%.
The real interest rate in the US has fallen from +0.12% to -6.30% in the last two years.
Our money has fallen sharply for two years. Since Bitcoin’s all-time high in November 2021, the US real interest rate has fallen by 0.3%. Bitcoin has fallen 69% in that time. Nevertheless, its characteristics and justification have never been more significant and well-founded since the beginning.
Mass adoption continues to expand, hodlers are waiting and hoarding! Sooner or later, the cause and economic benefits of cryptocurrency will take their rightful place.
About the author
Steve Dubied is a financial analyst based in Switzerland. His company CONSULFIN SA analyzes general markets and develops investment strategies. Dubied’s professional career focused on institutional portfolio management and hedge fund management from 2005 to 2015. His interest in cryptocurrencies dates back to 2017. Cryptocurrencies have become a major theme in his activity due to the technological advances they bring and the response they provide to increasing monetary operations. at the global level.
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