Bitcoin haven against inflation

Surely you have heard that it is a refuge against inflation, or a store of value. But why? In this article I will tell you in detail.

Bitcoin is non-inflationary. The amount of bitcoin generated per year is known and decreasing, regulated by the halving. In the future there will be only 21 million bitcoin. Not one more. 

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In such a way that a million bitcoins will always be 4.7% of the total bitcoin.

Instead, a million euros will tend to zero in the future, because the printing of FIAT currencies tends to infinity.

It is the difference between a non-inflationary currency (bitcoin) and an inflationary one (FIAT). The first retains the value over time and the second does not. No matter how many millions you put in the numerator of the second equation, your money will always go to zero as more FIAT is printed. That is why bitcoin is a store of value and FIAT currencies are not.

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This is because printing money is not creating any wealth or value. The currency is devaluing. And the more money that is printed to get out of one crisis, the more money will need to be printed to get out of the next. And so on. Until the value of the currency collapses as we have seen in numerous examples throughout ancient and recent history. It is nothing new.

In the end, in the FIAT system it is not up to you to preserve the value of your money. You must place your trust in the sound management of central banks and governments. And that at this point in history is too much to ask. For this reason, bitcoin gains more followers every day.

"Inflation is the surest way to fertilize the rich man's land with the sweat of the poor man's brow."

Charles Holt Carroll

 

In the medium and long term, the expansionary policies of central banks can make inflation grow so much that the savings of a lifetime are worth little or nothing over the years.

 

Annual inflation of 2% on average means that after 20 years a third of what your saved money is worth disappears. If inflation is 3%, half.

 

“Risk is not an obvious concept. What is commonly considered risk may not be. And vice versa. We tend to think that cash is risk-free. But it's not like that. It contains an implicit tax called inflation.

Kjell Inge Rokke

 

Given its radically different nature from FIAT currencies, bitcoin is a way to secure invested value over time, regardless of whether governments or central banks become overly generous in their monetary policies.

Today central banks aim for a recovery of the economy and low unemployment. Whatever the inflation (although always > 2%). They have already stated that they will not stop their stimulus programs until they achieve their goals. This phrase really confirms that it does not matter if there is inflation or deflation in the coming years. If there is inflation, the use case of bitcoin as a store of value will be valid. But, deflation will also benefit bitcoin as central banks will continue to print money until the inflationary moment occurs.

Therefore, it is one of the few situations in history in which any of the macroeconomic scenarios is highly positive for an asset.

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all about bitcoin

Bitcoin is a digital currency that circulates through its own network of computers connected in a decentralized way. Precisely because it is decentralized, it does not require any central or local authority to manage it. Hence the libertarian character of the currency.

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all about bitcoin

In a parallelism with the Internet, it is said that the penetration of Bitcoin in society is in a period equivalent to the 90s, when the network of networks began its gradual adoption. The process of adopting a new technology is widely studied. In addition, a series of medium and long-term models developed by macroeconomic investors of various kinds are available. 

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