The Cycle of Traditional Economic Manipulation is an Opportunity for Cryptocurrencies
One of the primary reasons that Bitcoin bulls are so full of hope and euphoria is the constant manipulation and complexity in global economics. Central banks are constantly changing their outlook and looking for ways to either inject or withdraw liquidity from the market. According to a piece by Forbes, this poses one of the strongest opportunities for cryptocurrency adoption, September 23, 2019.
Hard Money Resists Human Intervention
Classically, precious metals were considered the strongest form of money. But in their absolute state, they are neither fungible (due to simplicity in counterfeiting) nor divisible.
The obvious step was to issue a promissory note with these metals providing underlying value, which is where paper currency was born. Eventually, society moved away from asset-backed currency and today, currency is issued by the decree of a government based on trust in the system.
Economics becomes more complex with each decade; we have rounds of quantitative easing to bring in more liquidity to markets, followed by quantitative tightening to remove excess liquidity and stabilize interest rates.
Gold and Bitcoin are intrinsically hard forms of money, simply because of their ability to resist human manipulation. Paper currency issued at the behest of a supreme authority can be very easily created and burned at the authority’s will.
As governments continue to fight against natural cyclicality of economies, the investment thesis for nonmanipulable forms of money strengthens.
Bitcoin Will Thrive on Demand Surges
Fiat currencies are affected by a multitude of factors ranging from interest rates, fiscal expectations, politics, and a wide range of other variables.
At its root, Bitcoin is affected by supply and demand. With a predetermined supply cap in place and an immutable core protocol, there really is nothing anyone can do to influence on-chain economics.
Inflation is more of an increase in underlying money supply which indirectly affects the price of goods and services in an economy. As governments continue to tinker with the levers of the economy, they will only continuously increase and decrease inflation.
The fundamental problem with this is that the move may not come at a time when it is necessary considering a majority of indicators used to decide this action are lagging ones (unemployment, GDP growth, demand for loans).
At the end of the day, Bitcoin has an unchangeable economic framework, which forces all demand and supply changes to be reflected in market price. Uncertainty is on the rise along with dictator-esque central bankers who enjoy playing God with the economy.
Bitcoin is unequivocally the best hedge against these risks, as it eliminates both uncertainty in economic parameters and the ability for human manipulation.