Bitcoin Walks the Way of Money

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If you haven’t heard the news, Bitcoin and cryptocurrencies are the new darling of investors. Since early 2020, Bitcoin’s price has skyrocketed and led to a bunch of investors putting their money in it. New industries have emerged such as Bitcoin gambling, and the world’s hesitant Bitcoin stance has shifted from illegal to promising.

The lack of government currencies in the wake of a viral pandemic have crushed interest rates. Printing money is a temporary and ineffective solution that can have unforeseen consequences. People are not interested in buying gold, so they’re turning their attention to Bitcoin. While Bitcoin is certainly not money, it’s well on its way to become something akin to fiat currencies.

Not Money Yet

According to experts, Bitcoin is the new gold. It is poised to eventually replace the dollar and seeing how high the prices has jumped, experts might have a point. However, whatever anyone considers it to be, it certainly isn’t money. Yet.

Money works only when it has stable value. That’s what governments are hoping to do in both the short and long run – keeping their fiat currencies stable. Bitcoin’s price is highly, if not extremely volatile. While many stores are turning to accept Bitcoin and cryptos, they will remain banned or illegal in most parts of the world for a while.

You see, we use money to buy products and services because the prices are stable. That’s because currencies are stable. If the dollar jumped as much as Bitcoin’s price does, you’ll be eating bread only one day and a pair of steaks another. Plus, there’s a nearly infinite supply of money and a finite supply of Bitcoins. In order for the economy to grow, the supply of money should be able to expand.

And, while cryptocurrencies are unlike money, Bitcoin (and others) may be well on their way to become fiat currencies. In order for this to happen, a lot of things should change. However, the current coronavirus pandemic has made many governments rethink their position on cryptos, putting them in a position to become a genuine alternative at some point in the future.

An Emerging Market

As the Federal Reserve prints money out of thin air, commercially usable cryptos will emerge. Bitcoin has worked well for many economically challenged governments so far such as Argentina. It especially exploded in 2020 and its expansion will continue well into 2021 and beyond.

As more and more governments and investors back Bitcoin, it will surely grow. There’s a supply limit, of course, but once it becomes legal in more countries around the world, experts believe its price will stabilize. It may end up being a viable alternative to the US Dollar and possibly worth more than gold. Traditional stocks are changing, with Bitcoin being a much better short-term investment than gold. Of course, the latter is much stabler, but that may be subject to change soon.

Bitcoin is walking the way of regular money and it will surely make tectonic financial shifts in the future, possibly sooner than later.

February 3, 2021: • No Comments

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