Bitcoin is making front-page news once again, as it recently experienced a massive run-up to $40.000. Investors from all over the globe are starting to buy Bitcoin once again, storing it safely in hopes of future price appreciation. You can find the latest cryptocurrency prices with Paybis.
Why is this happening? Many argue that the instability of the global economy has pushed many to consider an allocation to safe-haven assets in fear of large inflation numbers over the next few years. This is not simply a hunch – nearly 35% of all USD in circulation was printed in 2020 alone, and it seems like we are just getting started.
This is why we wrote this article. In the next few chapters, you will get a better understanding of the reasons behind Bitcoin’s surge in popularity, and why everyone sees it as the only “way out” of an eventual economic collapse. Let’s delve in.
Why Bitcoin is important
Bitcoin is a decentralized cryptocurrency, meaning it has no central point of authority. This makes it uncontrollable by governments and institutions, allowing for trust to be built on the basis of code.
Aside from that, it has a set supply that will never be exceeded, and it is impossible to simply “copy” a bitcoin, due to the large participating network that is involved. Each Bitcoin can be transferred to different public addresses, which are the entry points of a blockchain, and accessed by individuals using their wallets.
So what does it become so valuable over time? In just a decade Bitcoin went from a mere dollar to over $40.000. The reason behind it is:
- Its resistance to inflation due to the capped supply.
- The Bitcoin halving, which the cryptocurrency experiences once every 4 years, effectively halving the rewards offered to miners of the network. This, in turn, increases the scarcity and thus the demand for the coin.
- Its similarities and benefits over gold. Bitcoin is both a swiss bank account in your pocket and a form of “digital gold” that can’t be confiscated.
As you can imagine, these features make Bitcoin very important in periods of economic instability. And by all means, 2020 was exactly that and more. The COVID-induced lockdowns and the uncontrolled money-printing practices of the government have made many people skeptical regarding the ability of the government to run their nation. And this is why most turn to Bitcoin.
How bitcoin affects the global macroeconomy
Currently, we are experiencing a massive transfer of wealth. Investors that are stuck to their old ways and those that are tech-illiterate are the ones that will be left behind, as generational wealth is being built on the Bitcoin network.
This process will not occur in a day’s time, however. It will happen slowly, through a number of different steps.
First off, we already see a massive influx of institutions converting their balance sheets into Bitcoin in order to avoid the upcoming inflation rates which will decrease the value of their holdings. We saw MicroStrategy follow this pattern in September, after which other tech giants like Square joined in as well. Shortly after, Paypal and CashApp increased the efficiency of buying Bitcoin for retail buyers. More and more people are buying up a hedge against the traditional financial system.
Secondly, as more institutions and large-scale investors enter the space, we will experience a “supply shortage”. Already now, Paypal, Grayscale, and CashApp are buying up 210% more Bitcoin than is minted on a daily basis. Eventually, the demand will grow so much that these institutions will buy directly from miners at a premium price. When this happens, we will experience massive price growth, unlike anyone we have seen before. Exchanges will no longer have any liquidity for BTC, and regular investors will find it nearly impossible to purchase the popular currency.
At this point, Bitcoin will attain geopolitical significance, and we will see countries compete against each other, using their energy reserves to mine any and all available Bitcoin. Keep in mind that the supply will keep decreasing steadily, which means that the value of those coins, and the difficulty of mining them, will go up.
Bitcoin is the solution to our failing monetary system, and if you are reading this post you are still early in the process. All cryptocurrencies will eventually change the way our financial system works.
Internationality may soon receive a new meaning
As Bitcoin continues to grow in value against the US dollar, other cryptocurrency projects are currently building the foundation for a decentralized world. One of these projects is Ethereum, the foundation of decentralized applications and the upcoming concept of the Metaverse.
The idea of a virtual universe consisting of a micro-world built on decentralized protocols has long entertained visionaries and certainly offers opportunities for an improved life to third-world citizens.
As we are moving towards a hyperinflationary state of the US dollar without any idea of the actual date on which the Covid-related lockdowns will come to an end, people are starting to lose hope. Centralized institutions seem to be failing to support their citizens, forcing ambitious entrepreneurs to create these fully virtual economies that anyone can partake in.
Built on the Ethereum network and fueled with the monetary system of Bitcoin, these economies could eventually change the whole way we perceive global boundaries, and forever change the concept of national vs international work. It will be very easy for someone living in the Philipines to work in a virtual economy that not only pays a higher wage in cryptocurrency but also enables one’s savings to appreciate over time thanks to high-interest rates.
Don’t be left out!
You don’t need to buy a whole Bitcoin to get started with your crypto journey. Each unit is divided into 10 million smaller units known as Satoshis. This is why the term “stack Satoshis” increases in popularity as well. As long as you start allocating a small part of your income each month towards Bitcoin, you will still have time to build a significant position in BTC, to protect yourself against a potential financial collapse.