Bitcoin it's a money problem
Bitcoin could be money, why was it created and why do we value it?
Why bitcoin
There is no mystery why Satoshi Nakamoto created Bitcoin. It is a direct response to the financial global crisis of 2008. Nakamoto left us this note in the gensis block. Academics see money complying with these functions
- Unit of account
- Means of exchange
- Store of value
Our fiat money achieves these services or functions, but it does so unavoidably being tied to the banking system. The financial crisis showed our fiat money is not always able to act as a store of value. It's unable to exist independent of the fractional reserve banking system and this system is prone to insolvency. Giving bitcoin a reason for being. A promise for a better money system. It's value being stored in the blockchain, a robust distributed database, as records. This does not explain why we value these records. Remember that the financial crisis gave origin to Bitcoin, called for a better technology
Why value bitcoin
Are we all stupid people believing in a big ponzi? Saying bitcoin is part of the tech bubble and should be valued as a tech company leaves questions. Why this bubble and is it going to burst? The tech bubble is caused by too much liquidity in the financial markets. This surplus liquidity was largely caused by the response of central banks to the financial crisis of 2008 known as quantitative easing. By this the central banks also fueled the mechanism that pumps up bitcoins valuation. Excess liquidity just means excess cash. Sounds like the nicest problem to have doesn't it? It's not, you would want to keep your worth if you owned large amounts of cash and you know fiat is not a good store of value because of the last crisis. Investing in traditional sectors is difficult since productivity slowed down or turned negative all over the world.
The message is a little subtle. I get it. The time to buy a protective asset is before the panic, not during. If you liked the recent crypto price run up, wait for a major fiat failure/pabic.
The fed started touting qt , balance sheet reduction will help the reflation trade
Liquidity will not diminish as money velocity will start to go up. Rate hikes will act as a source of inflation.
Fiat downfall . i.e. The end of the us dollar as reserve currency will start when a last blow up in the dollar value and the dow ends. First the bubble has to reach real extreems like a 40.000 dow.market optimism also has to reach such a level. Only then will a fiat crisis become factual.
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Well written