All cryptocurrencies that aspire to be the new benchmark monetary protocol like bitcoin are competing. In the end, we may be faced with two possibilities: they all end at zero, or one of them manages to assert itself as the new digital monetary standard. Bitcoin is currently the best encrypted site to win this fight to the death.
Bitcoin is not a stock or a commodity
Currency is a very specific type of asset, very different from commodities or stocks. For example, to calculate the underlying value of a stock, it is sufficient to estimate the present value of the cash flows that the company is expected to generate in the future. Whether it is a bond, a share or an option, all of these assets have one thing in common generate measurable financial flows.
Assets with large cash flows and less risk are generally better valued than low risk cash flow assets. The various assets can then be compared thanks to financial indicators to determine what stock is attractive based on the distance between its original value and its price.
Bitcoin is therefore not an action, because it does not generate cash flow. You will never receive dividends plunder BTC, if you did not know.
But what kind of raw material is it? Raw material derives its value from its use to meet a basic need: energy, housing, food, etc. Commodities are usually valued based on the history of the commodity in question and by obtaining average prices over long periods. Here, too, bitcoin does not seem to be a commodity, because it does not allow the production of useful goods and traders in the market.
Bitcoin: poor quality currency in 2022
Bitcoin is therefore a currency. That is, an item that you accept as payment because you expect it to be accepted as payment when you want to make a purchase with it in the future. The need to shift purchasing power over time being a basic human necessity.
Currently it is a poor quality currency in so far as she is it is rarely accepted as a medium of transaction and is too volatile to carry purchasing power over time.
Since the currency does not generate any financial flows, its underlying value cannot be calculated as one would for stocks. In contrast, currencies can be compared, for example between BTC and the dollar or between BTC and the euro. All currencies are in competition. Finally, the currencies that represent the best store of value (especially between two transactions) and the best exchange medium are essential.
If bitcoin was to be a good currency in 2022, it should ensure that its users can buy more and more commodities over time, and with as few fluctuations as possible. That is clearly not the case yet, because purchasing power in terms of goods is too volatile in the short term. Which makes us say that at the moment the BTC is a failure.
Bitcoin, volatility and entropy
Because bitcoin is a type of currency, its current “value” is determined by the future price of BTC. Therefore, the price is current a mirror of faith on the price of BTC tomorrow. If it’s still at $ 20,000 and not at 0, it’s becausethere are more people who believe that BTC will trade above $ 0 in the future. And it is the sudden changes in people’s beliefs about the future price of BTC that are driving the currency’s volatility.
To minimize currency volatility, central banks are highly relevant institutions: they coordinate people’s expectations toward a common belief. Of course, she manages to coordinate these beliefs as long as it remains credible. If it loses its credibility (for example by creating inflation), then its activity will have the opposite effect and will lead to an increase in entropy. Of course, not all central banks have the same level of credibility: the ECB is not the feeder, it is not the Central Bank of Venezuela.
That is why in the second half of the 20th century, states sought to increase independence between central banks and the exchequer. In fact, divorce did not happen and today there is a strong relationship between the central banks and the states.
No. Political on bitcoin
So Bitcoin has huge potential, based in particular on its acephalous system of governance that guarantees that it will never exceed 21 million units. In other words, bitcoin is a some credibility with its monetary policy. It remains to coordinate and stabilize the beliefs of the people, what is complicated in a leaderless environment.
The difficulty stems from the fact that bitcoin is an object anarchist does not have a central committee, Political and especially without weapons. Here’s the paradox: bitcoin derives its value from it irregularitybut this may prevent him from changing the test to be a credible competitor to the Greenback.
Let us remember an event in monetary history that illustrates the dangers posed by unstable and poorly coordinated beliefs and expectations. In 1707 John Law went to France. He suggested replacing the currency with banknotes based on the current currency shares of West India Company. In 1719, the value of the Company’s shares rose from 500 pounds to 10,000 pounds. John Law’s silver medal was first successful… before falling sharply in 1720. John Law destroyed many people with his Ponzi. Also Your Kwon.
So we can see that bitcoin is a very fragile thing that could easily fall to zero is a currency derived from a central state entity credreidte.
The race to be the standard treasure of the value of the future
Currencies are protocols that are subject to the divine power of network effects. Protocols usually change direction reference standard only. Just as VHS and Betamax could not exist, currencies subject to the free market are converged towards a reference currency. Today, the dollar is the ultimate monetary standard. So could the chaotic competition we look at between BTC and other cryptocurrencies end the complete demonetization of others without counting the victory currency.
We can then realize that all cryptocurrencies are Ponzi pyramids that have no chance of becoming a stable standard and have the only value proposition of being a medium of exchange and Ponzi pyramids that will nialas. For example, Litecoin, Bitcoin Cash, UST or XRP.
What happens to shitcoins is thatthey work thanks to the trust that everyone puts in them. But everyone’s trust is fragile, because it comes from everyone. It rises because it rises. When the lie is exposed, collective trust crumbles and creates a death rush.
So, the market will have to name a clear winner who will destroy all its previous competitors. Either of these cryptocurrencies will all die and end up zero, BTC included, or they will all end up zero only.
Bitcoin is not necessarily the crypto that will emerge from this chaos, but it certainly is the one that is. which is in better condition. The investment logic would therefore be the least risky allocate more savings to crypto which has the best chance of becoming the monetary norm in the future.
After maximalism, Bitcoin imperialism?
So we have seen that all currencies (including fiat) are like speculative forms of bubbles. Bitcoin is a currency. Bitcoin is so a bubble.
The question every investor should ask themselves: what is the probability that the bubble will never burst .i. bitcoin becomes a benchmark monetary standard ? That is to say that bitcoin executes other cryptocurrencies before attacking the dollar? The probability is really very low, but it is not zero. This is an even stronger hypothesis than the maximum thesis. We could talk about itbitcoin imperialism !
If BTC managed to suppress the feed, it would be a miracle.
This bet against nutrition is nevertheless based on convincing arguments: central banks have systematically switched between orthodox ranks and periods of monetary easing. Even if the Federal Reserve uses all of its arsenal to curb current U.S. inflation, a new printing cycle is likely to emerge again in a few years. When inflation is lower and seems to be docile” under control “.
Indeed, as long as the public deficit does not become illegal, as long as the public debt is in line with the Constitution, as long as academics are ready to deliver “studies” that show that the deficit creates growth , and so on. the inflation cycle will resume.
In this case, investing in BTC may be particularly smart.
The best way to permanently end bitcoin
Just close the exchanges. If you are convinced that governments will ban Coinbase and Binance, then you should bet on the dollar rather than BTC.
If the exchanges closed, all mainstream investors will be stuck with signals that they cannot sell. But when you can not sell anything, it is worth nothing. Once a very large percentage of people assume that a token commodity has been demonstrated, the move cannot be reversed.. You can never buy a house with an assignee. There is no way to save the demand for unspent currency.
Bitcoin, like all other currencies, is a bubble. Is it the bubble that will not burst, that is to say the next monetary standard? Bitcoin is in danger of ending up in zero if it fails to surpass all its competitors in the crypto market, before the final battle is fought with US greenback. Bitcoin is far more likely to end up with zero than a million. However, when we see the level of belief in the religion of deficits, we might well be surprised if we should not allocate part of our portfolio to BTC.
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Bitcoin changes everything! Coming from a financial background, I am passionate about everything about this technology. Every day, I try to enrich my knowledge of this revolution, which will allow mankind to progress in its freedom.