Last night, Ray Dalio of Bridgewater Associates has written his concerns for Bitcoin. He noted that the problem with Bitcoin is its volatility which could prevent businesses from using it as it doesn’t protect buying power. Besides, the government might outlaw Bitcoin should it become successful enough to replace fiat currencies of countries. He also added that gold would be a better alternative to currencies given its large adoption over the century.
What are the problems of fiat currencies? Increasing debt levels, unlimited quantitative easing by central banks during crisis over the past decade, and high inflation rate causing the lost in value of assets and currencies would point to the failure of fiat money. Since 1913, the US Dollar has lost over 96% of its value which means 1 dollar currently would translate to only 4 cents back then. Some would argue that the Fiat currencies exist to allow the government to be in power, as they have the right to print money in the expense of current owners.
So gold as the global currency then? While gold had been rallying with the expectations of inflation and as a safe haven, its physical constraint would prevent daily usage of gold. Digital gold is a smart alternative but should it be digitalised and centralised, it would have counterparty risk and may prompt the government to seize control.
So what are the bull theses of Bitcoin? Firstly, limited supply. Bitcoin has an exact limit to be mined and the current Bitcoin in circulation are known as well. Besides, while many has calling Bitcoin as a way to launder money, it is actually not a good idea. Given the transparency of the currency, money laundering is also prevented as it could be easily tracked, and many public organisations like US Justice Department, Europol, Tokyo police successfully arrested illegal activities through Bitcoin. In addition, given the transparency of the currency due to the decentralised system, no intervention by the central banks are needed! To be more specific, European Central Bank has stated on its website that it is not their responsibility to regulate Bitcoin or other cryptocurrencies. Some countries went even further to purchase Bitcoin recently, including the Iranian government which amended its cryptocurrency regulation to enable licensed bitcoin miners to sell their coins directly to central bank for use to fund imports.
Well, how about its adoption by the institutions? One of the Big 4 banks of China, China Construction Bank, had recently issued US$3 billion of bonds which could be bought with US Dollars or Bitcoins in Malaysia. Moreover, firms like MicroStrategy and Square have bought large amount of Bitcoins, US$250 million and US$50 million, respectively. What make Bitcoin even better than gold is its ability to be divided for transactions. A Bitcoin could be bought or sold in a much smaller amount as it could be divided into 8 decimal places (0.00000001 Bitcoin) – which is US$ 0.00018 (taking Bitcoin as US$ 18,000), and will facilitate daily transactions easily, and globally.
Comment below and let us know your thoughts on Bitcoin!
Source:
[1] Ray Dalio Says He ‘Might Be Missing Something’ About Bitcoin - Bloomberg
[2]A Big Chinese Bank Is Selling Bonds That Can Be Bought With Cash or Bitcoin - WSJBitcoin (microstrategy.com)
[3]Square buys $50 million in bitcoin, says cryptocurrency 'aligns with company's purpose' (cnbc.com)
[4]Iran turns to bitcoin to fund imports - Asia Times
[5]TradingView
