- Inflation is a growing problem, especially after the last and biggest annual increase.
- many experts still consider it a “bubble class”.
- BTC is physically portable, fast, globally distributed, and accessible.
- However, BTC’s price volatility weakens its store of value (SOV) attributes.
The ideological differences between communism and capitalism are many, however, the following two quotes from historical examples of each economic model seem to coincide on at least one point: inflation devalues money.
“The way to crush the bourgeoisie is to crush it between the grinding wheels of taxes and inflation.” ~ Vladimir Lenin, former Prime Minister of the Soviet Union
“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. “~ Alan Greenspan, Former Chairman of the US Federal Reserve
Inflation is a growing problem, especially given the recent surprise announcement from the U.S. Department of Labor that the consumer price index has risen 4.2 percent over the past 12 months, marking the largest annual increase. since September 2008.
For millennia, gold has been viewed as the self-defined “gold standard” as an inflationary shield compared to various asset classes. That is still true today with more than $ 10 trillion invested in gold globally.
By comparison, at less than $ 1 trillion in current value, 74 percent of financial experts recently surveyed by Bank of America (NYSE 🙂 continue to dismiss Bitcoin as a “bubble-class” asset.
However, much has changed since Bitcoin was created more than 10 years ago, and it could be the best investment alternative to bring down the reigning inflation hedge of its golden throne, to the benefit of individual investors alike.
The key differentiators of Bitcoin include:
1. Physical Portability – Billions in BTC can be carried in a secure crypto wallet that fits in a coat pocket, while an estimated 1 billion gold bars weigh around 24 tons. This is relevant because, during the hyperinflationary period that ravaged the Weimar Republic after World War I, wheelbarrows full of German marks were needed to buy a loaf of bread. Paying with gold would be just as impractical.
2. Transfer speed – Any amount of BTC can be instantly transferred from person to person, but not with gold. This unique attribute results in lower transaction fees, elimination of settlement delays, and elimination of outside intermediaries. During inflationary cycles, obtaining resources faster and at a lower cost is of vital importance for families or companies in difficulty.
3. Global distribution: any amount of BTC can be digitally moved anywhere in the world with Internet access. In contrast, the maximum amount of gold that can be moved across the US border is $ 10,000 and larger amounts require a US customs declaration and the submission of a FINCEN 105 form. This attribute makes Bitcoin an ideal deflationary lifeline for people struggling in hyperinflationary countries like Venezuela. Zimbabwe and Sudan.
4. Accessibility: all you need to buy BTC is a payment method, currency exchange, and internet connection. This allows the “unbanked” masses struggling with inflation or corrupt monetary systems the opportunity to circumvent fiat currency hurdles within their home countries thanks to the promise of financial democratization that Bitcoin offers. In comparison, securing any amount of physical gold requires a much more complicated process due to its general lack of use, limited availability, and secure storage requirements.
5. Store of value (SOV): BTC has many of the SOV properties of gold, such as scarcity, fungibility, proven appreciation, widespread acceptance … etc. While Bitcoin cannot be turned into jewels like gold, BTC has other unique characteristics that distinguish it from gold. For example, Bitcoin can be divided into subunits much more easily than any type of physical gold. Bitcoin can also be gambled, instantly transforming it into an interest-bearing asset that can also be collateralized, a feat that is much more difficult to do with gold. Bitcoin is much easier to convert to other assets compared to physical gold. Lastly, despite recent criticism on Twitter from Tesla (NASDAQ 🙂 founder Elon Musk, Bitcoin production uses about half of energy resources annually as gold production.
While Bitcoin is down more than 50 percent from its all-time highs earlier this year, and investor sentiment towards it is negative, its fundamentals have not changed. In fact, the $ 6 trillion federal budget just announced by President Biden only solidifies the case that supports the deflationary properties of Bitcoin. Coupled with the fact that the US Department of the Treasury has been working overtime printing dollars at an unprecedented rate, nearly $ 5 trillion in 2021 alone, bringing the world total to nearly $ 20 trillion in circulation , the specter of inflation does not disappear and Bitcoin may be the best protection available.
On the other side
- Despite the fact that Bitcoin has generated triple-digit returns annually for every year it has existed, its price volatility weakens its store of value attributes.
- Critics of Bitcoin continue to criticize its high levels of energy consumption, despite the recent formation of the Bitcoin Mining Council in the US, spearheaded by Elon Musk and Michael Saylor to adopt sustainable and eco-friendly practices.
Join for the flip side of crypto
Update your inbox and receive DailyCoin editors’ picks once a week directly to your inbox.
You can always unsubscribe with just 1 click.