A stable price of Bitcoin. Everyone's happy?
Does less volatility mean a constant price? What are we measuring it against?
Bitcoin has been hovering around the 25K to 30K range like a trapped beast where the keys to its freedom are in the hands of the almighty dollar. The present banking collapse we are seeing leads Bitcoin upward and allows it to gain momentum followed by another regulatory deadlock that brings it tumbling down. But with each fluctuation, confidence in the currency seems to be boosted. That can be clearly seen in the dominance chart. Trust is a major factor holding the current financial system in place. If that is eroded, nothing remains. It is a slow and gradual process but with the current situation the authorities have created, something is inevitably going to break. But hey, bitcoin is trading in a stable range. Doesn’t this remove its often-bashed criticism of price volatility? Well, anyone thinking that seems to be losing a sense of the big picture. There is more to it…
The binding force: money
There are broadly four factors of production in an economy which are labor, capital, natural resources, and entrepreneurship. Money is the thread that binds the fabric of the economy in a sustainable way. Hence it should provide an equitable and just way of exchange between the various entities functioning in the economy. It is a good like any other good that must reflect the status of an economy. Sound money is a great marker of everyone’s claim on natural resources. Hence the price of money should be dictated by the natural forces of supply and demand.
Deflation is a natural consequence of human innovation. Things get better over time and much less time is used in the manufacturing of entities aimed at human leisure. In the end, people are liberated and have time to work on more productive acts. Money, in this case, must follow society such that its value must increase over time. This is because only then will the more productive survive when they have access to the good that binds them socially to others. The people who are not able to cope with the developing times meet a sorry fate. Evolution has to play its course and produce a more productive society after each succession.
The big bros can’t stop interfering
Now, we sprinkle a bit of centralized controlling juice over the whole economy and things turn out differently. Humans are instinctively stringent. We don’t like drastic changes and want a stable existence. When someone comes up with a new idea, it takes generations for it to be accepted as a norm and the building of human civilization to be built upon it. Everyone wants to make their own skyscraper and rule it with full zeal. This is where tribalism, nationalism and all those -ism words kick in. We don’t recognize the collective human colossal and tend to be divided into conservative blocks. Hence the flow of money is also taken into control and the amount of capital someone has access to is also restricted based on a major vote rather than the individual capabilities of each and every citizen. You are suckered into a dream biased to your living conditions without even recognizing that.
The treasury doesn’t like it when deflation happens. From the ground up, the system of banking we know today runs on debt. It is a house of cards starting from the irresponsible lending made possible through fractional reserve banking all the way up to political mandates focused on securing their term in the presidency. All the conditions align towards an unjust monetary system where wealth inequality is normally accepted. The higher the inflation, the higher the GDP in nominal dollars which leads to a higher tax base, and thus there is a false sense of paying down the debt. Problems are solved, but a bubble is inflated and the can is kicked down the road. This inflated bubble is popped after a series of cycles which we term “a crash” and everyone moves on after it. Who suffers are the countless productive people who are shoved into the mess of ill practices and whose talent dies in a constant struggle. The world is devoid of its innovative outlooks because when you chase inflation and are surviving rather than living, your brain is wired to surrender.
All of this points towards the fact that money, which is the central binding force should move alongside society. Society is willing to deflate the value of the monetary unit. Hence, the value of the monetary unit must also deflate i.e. increase value over time to preserve purchasing power.
A future outlook
Knowledge and innovation won’t stop. Money is a representation of that. Anyone willing to contribute to the world must have their fair share of access to financial capital to gain liberty. Initially, it has been gold that provided a just system of exchange and financial coherence. The resource won’t end with time as anything can be money as it is anything that represents value and has a claim on energy. This time, it is Bitcoin that has the spotlight. The decentralized peer-to-peer network stands for financial inclusion. This can be clearly depicted in its rise in value after the banking collapses. Its ethos is the unjust proclivity towards the banking sector and not letting them suffer for their unjust actions.
We tend to value bitcoin based on the dominant currency today i.e. dollar. It is important to consider that the foundations of the dollar are also shaky. The only reason it is surviving is its status as the world’s dominant currency and the hegemony of the USA because of its strategic importance. The only way it can be dethroned, in my opinion, is the USA becoming not so “united” in the distant future. This has seen to be the case but let’s not go into speculation. One thing is for sure, the collapse of the dollar is inevitable and will be a gradual and stretched process.
https://twitter.com/girdley/status/1652285351107641344?s=20
Valuing Bitcoin in terms of the dollar is a fallacy in itself. One is sound and not controlled by any single entity while the other has a money printer which goes on just by the press of a button. But yes, the common man in Nigeria or Pakistan or any other third-world country who lives by hand to mouth won’t accept the currency which deteriorates his holdings in the internationally recognized frame. Hence, we are subjugated to the dollar hegemony when valuing the currency. Surely this will be the norm but not for long. One bitcoin will remain equal to one bitcoin and the amount of energy required to mine a single bitcoin will tend to increase making the currency more precious in the coming years. In addition, the halving of the supply further adds to the value in the long term.
The stage is set for the currency to perform. The only problem is the bad actors have hijacked and are not going down without putting out their maximum resistance. The best course: wait, work, and watch.
Hope you were enlightened.