Bitcoin: Borderless one world, one currency dream is very far away..
The price of bitcoin can change overnight, that we all know. We can only predict what the exchange rate could be based on our knowledge and the trading information we collect, or changes in government legislation works as a sign for us, but still we can't gurantee anything.
So, the next thing I'm trying to solve is, how will we determine the price of products?
Hypothetically let's say there is a super market that sells groceries and they only accept bitcoin, so how will they determine their pricing?
During summer, I buy lots of watermelon, its my favourite, and I buy it from the same farmer and more or less the price is same everyday, except they only change the price every year, which is determined by calculating annual inflation.
If I start buying watermelons with Bitcoin then how can we solve this issues regarding price fluctuation? One way is to set a fixed price of the products in fiat and everyday we calculate how much bitcoin is needed against the exchange value of fiat.
But what happens if I pay my supplier 1 bitcoin today, take 4,000 watermelons and settle deal with him, today bitcoin was $5,000.
So next day my supplier wants to clear his bills, pay his labor etc etc..but the exchange rate is now suddenly $3,000. Well anything can happen and it could even rise to $50,000
But in this hypothesis we are decreasing the price. Therefore, whenever price falls, a big amount of value evaporates from the economy.
Moreover, since no single authority can give a judgement on his own accord, as the whole thing depends on every single individual players of the market, the miner, the developer, the trader..sometimes outside forces like the electricity regulation board of the country. My home's electricity supplier have already send me a notice that from January they are increasing price by 15%
And back to that farmer, those type of businessman rely on their daily cash flow.. especially when part-time labours are hired on a flexible terms and conditions, they are hired based on their daily labour. And payment must be given to them, therefore when the price of bitcoin falls, these type of people can't even hold their currency and wait till price goes back..
Most of the famous people who are advocating bitcoin with the dream of unifying the world and make it one borderless world with just one currency.
Moreover, you can't even imagine how many millions of people in today's world are living without electricity at their home, let alone a smartphone and WiFi connection. Most are still going to the field for answering nature's call because of poverty. Well we can just exclude them off from our one world, then it's not exactly accomplishing the dream for which so many people are working day-night.
I will keep thinking about this in more detail and if you know these answer please comment below..it will definitely give my brain a bit to take rest away from these silly thoughts I'm having.
good analytic
isn't there anyone around to help me understand this better.. I'm itching to find these answers but I can't find anyone who has answers to my questions 💔
img credz: pixabay.com
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You're exactly correct. BTC is very volatile now. All cryptocurrencies are. This is because the markets for them are small, relative to currencies with more market share.
This is a reason that people are creating cryptocurrencies that are priced in gold, or other goods.
Something that is going to change is the stability of the dollar. The world has been using dollars to price goods in the global markets, and if you wanted to buy oil, you had to pay for it in dollars. This petrodollar is coming to an end. The BRICS, particularly, and Venezuela and Saudi Arabia even, are beginning to trade oil for gold backed Yuan, and all those dollars that Venezuela and Iran, etc., used to be collecting for the oil they sold are now no longer needed by the countries that had to have them to buy oil.
These dollars are going to be coming back to the US, and enter our markets here. This will cause inflation to soar. Making it worse is that during the post 9/11 era, Bush and Obama quintupled the supply of dollars in the world. Programs like TARP, and the various bailouts, dumped huge sums of dollars into the accounts of the megawealthy, and these dollars have been kept out of the economy, just adding zeroes to the balances of the rich.
But inflation will eat their wealth if they keep it in dollars, as inflation makes a currency worth less, have less value. They're going to dump their dollars too, into the stock market, real estate, wages, wherever they can exchange them for goods or services, or other currencies.
This will cause our domestic markets to have to absorb 5 times as much units of currency as it presently holds.
Basically, prices are going up 500%, over the foreseeable future. The rate of dedollarization is going to drive the inflation we experience, but I think it's going to be horrible within a year. Stocks and real estate are already bouncing off highs, so it's already begun.
This is going to affect farmers selling melons very quickly. If you buy 4000 melons for $4k, and the farmers costs are going up at 20% per month, he's going to quickly lose his farm, so he's going to charge $6k for the melons, and hope he can pay off his creditors before they raise their prices.
BTC will be immune to this problem with dollars, and I believe the prices of silver and gold are being kept low in order to drive people to BTC, rather than metals, to hedge against inflation. This will drive millions of people to use BTC, and other cryptocurrencies in the next year, I think, and that will help to stabilize BTC - rather to make each coin much more valuable relative to fiat, particularly dollars.
I do not invest. I am a carpenter. Do not take my advice and invest your money. Do research about any of the issues I raised by googling for answers regarding them, and then decide after you have done due diligence how you intend to invest. These are just my opinions regarding what is happening, and how it relates to BTC volatility.
Hope this helps you understand better.