Bitcoin: Every monetary system since antiquity has failed and created countless social disasters. But BTC is a different beast that could save us all, says Steve Dubied of Consulfin.
BTC has been falling since inflation hit the headlines. Advocates 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. Its issuance is limited to 21 million units, 19 million are already 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 transmitted instantly and confidently through its technology. Fees are minimal, there is no intermediary who has a right to judge the transaction. BTC has no debt, unlike fiat currencies which accumulate expenses by refinancing themselves through the bond markets. Its network is increasingly solid. This is because its operation relies on its participants in the Proof-of-Work (PoW) consensus, which has been growing steadily since its launch. Its global energy consumption is negligible (0.16%) and renewable energy is mostly used for its operation.
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 at any place and at any time.
For thousands of years, human beings have been looking for such a means of preservation. Every monetary system since antiquity has failed and created countless social disasters. Inflation today is just one of many episodes since we have found a name for it.
Bitcoin and the great diversion
Since the depreciation of fiat currencies has arisen significantly in recent times, BTC has been transformed into a technological tool. It is being compared to a Nasdaq-listed company that is not making any profit and is being 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 thinking about BTC is absurd and ignores all the virtues it holds 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. All the while, fed funds rates 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% over the last two years.
Our money has been depreciating 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. Yet its characteristics and rationale have never been more significant and well-founded since its inception.
Mass adoption continues to expand, hodlers wait and hoard! Sooner or later, the reason and monetary merits of cryptocurrency will take its rightful place.
About the author
Steve Dubied is a financial analyst based in Switzerland. His company CONSULFIN SA analyses 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 crypto-currencies dates back to 2017. Cryptocurrencies have become a main theme in his activity due to the technological progress they bring and the answer they give to a growing monetary drift at a global level.
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