General Overview

The price of bitcoin has skyrocketed at the beginning of the year. Hashcash has once again become one of the most profitable investment assets in 2021. Despite this success, all signs point that people are still a little cautious about decentralized digital money. Why? There are several reasons for this.

First and foremost, the sixth-largest currency in the world is not backed by any physical commodity or precious metal. Most of us need something a bit more tangible, that can be seen and touched. While other currencies are represented in the form of coins and banknotes, bitcoin lives on the internet. Its value is based solely on mathematics.

In many respects, people are unprepared for changes. They are still very ignorant about the market and crypto. The lack of understanding and misperception of bitcoin continues to be the most common cause of avoiding it. This makes sense because we tend to be frightened of everything we don't know.

Last but certainly not least, the reputation has become stained due to severe cases of fraud. Bitcoin is still associated with the money of criminals and do-nothings. Therefore, many people still think that it is nothing more than a bubble. Criticism from numerous eminent personalities also feeds into the population's existing mistrust of BTC. For example, Warren Buffett, one of the most successful investors of all time, believes that bitcoin is gambling, a game, not an investment.

The fiat financial system, in turn, inspires much more confidence and looks more reassuring in the public eye. But… here comes a but. The existing scheme is rife with problems. Although it paints a rosy picture, it does not reflect reality. Hence, it would be interesting to lay out a balanced overview of its shortcomings. With that said, let's get started.

The Traditional Financial System

The staggering rise in the bitcoin price resulted from a very specific macroeconomic environment. We are talking about the continuing weakness of the US dollar. More and more people around the globe understand that we have run into high inflation which has accelerated over the past year. The Federal Reserve System is to blame. The central bank of the United States has dramatically increased the number of dollar notes in circulation. In 2020, in just months, more than $12 trillion were printed.

Taking a walk down memory lane, President Nixon established the current monetary and financial system in August 1971. But most importantly, from this point on, the entire U.S. money supply continued to grow. Between 1975 and March 2020, it grew from $273 billion to $4026 billion. During the coronavirus pandemic, by $3012 billion. This means a 75% increase.

This unprecedented acceleration in the growth of the money supply has terrible consequences for the majority of the population. It resulted in an actual loss in purchasing power. The poor have become poorer and the gap between the rich and poor nations has widened to a chasm. Unfortunately, the situation will not improve in the coming years.

What's painfully ironic about this is that 80% of the total capital is owned by 20% of the people. This small group owns an enormous amount of money and creates the international rules of play. These people develop capital, own it, and force the rest of the population to use it. But it cannot last forever: at some point, this system will simply reach its limit and result in something else. We can certainly state that the global financial system is coming to a tragic end. Unless something is done, the world is at risk of being hit by a global financial crisis. It can entail the risk of serious consequences.

While the wealth of American billionaires has increased by more than $1 trillion since March 2020, the losers in the financial world find themselves in light of the difficult and often tragic situation. In order to protect themselves from the never-ending weakening of the US dollar, everyone is looking for a safe haven asset. This is where Bitcoin comes into play.

Bitcoin to the Rescue

The brainchild of Satoshi Nakamoto was originally designed as a decentralized hedging tool against the imperfections of the banking system that was evident during the financial crisis of 2007–2008. But time passed. Twelve years of time. We have big problems on our hands again. Investment establishments are trying to keep the economy on the edge of a financial disaster. They print money under the motto "After me, the flood". A major feature of the high-yielding alternative asset class is limited issue. Bitcoin is often called digital gold since the reserves of the precious metal on our planet are also limited. Face it: you cannot produce gold out of thin air. The same can be said about bitcoin. The maximum number of coins is strictly limited to 21 million.

But the real pony here is the underlying technology. As we already mentioned, bitcoin is decentralized. The logic of decentralization is based on an intrinsically powerful idea. It is not monitored by any central body. No authority can prevent you from making bitcoin transactions. When it comes to cash, it is controlled by national central banks. As a matter of fact, these organizations are powerful enough to prohibit you from using your assets. With a decentralized superorganism, it's impossible. Your precious coins are wholly owned by you. They are stored in your wallet, and no one else can assign them. The user can hold them joining the HODLER community or simply spend them for their own needs. In any case, the only person who controls your funds is you. No force on Earth, neither a presidential decree nor regulations of the Bank, can confiscate or nationalize magic internet money as long as the private keys to the addresses are yours.

In addition, BTC is the first successful implementation of decentralized digital money. It has the undeniable advantage of making payments without any third-party watching what you are doing. All transactions have a unique cryptographic signature, allowing for the creation of an indisputable record. What is more, it enables people to conduct transactions pseudonymously. With platforms like PayPal, it's just not possible.

Final Words

Bad policy and a flawed monetary system joined together to create a catastrophe. Central banks and governments around the globe have injected stimulus money into the economy at a record pace in an attempt to fend off a global recession. Never before has there been as much money as there is today and rarely money has been so cheap. Yet, the central banks continue to pump money into the world, something that can't go on forever, it's a ticking time bomb.

This is where the beauty of bitcoin comes into play! Cryptocurrencies are built on cryptography. They are not secured by people or by trust but by math. The idea of bitcoin was to allow money to change hands without a central bank’s involvement. Instead, the tasks of the central bank are broadly distributed among cryptocurrency users via the internet. Given that, it is safe to say that bitcoin is not a currency for the government. It's a global currency for the people.