Bitcoin’s last rug against the US dollar

Bitcoin has been the biggest heist the financial sector has ever known.

Evaluating Bitcoin’s success in terms of the dollar — the ultimate symbol of what the granddaddy of all cryptocurrencies was created to rebel against — is flawed logic.

Bitcoin began as a rebellious child protesting the system that caused nearly 10 million Americans to lose their homes after the 2008 financial crash.

Initially, Bitcoin needed a dollar value representation simply because it cost a certain amount of dollars to mine. But Bitcoin Market, Mt. The emergence of Gox and other exchanges where users can trade with each other has created an artificial supply-demand paradigm that values ​​everything.

At that time, the only measure of this value was the US dollar.

Today, those against bitcoin (BTC) point their fingers at the falling BTC-USD price and laughingly convince themselves and others that BTC was never worth anything, as they have done all along.

But BTC was not created to match the dollar. It was created to enable people to become financially free from the centralized banking system that has frustrated the world.

Bitcoin is well on its way to achieving complete dissociation from the US dollar or any other fiat currency, establishing its existence as a medium of exchange that contains its own intrinsic value.

This is scary for central governments and banks.

Widespread adoption of Bitcoin

The Italian-speaking Swiss city of Lugano is leading the way in bitcoin adoption with its “Plan B” initiative. Plan B is a joint initiative between the city and Tether to transform Lugano’s financial infrastructure using bitcoin.

Soon, citizens of Lugano will be able to use bitcoin at 200 local businesses, as well as pay their taxes and other public services using the cryptocurrency.

If Joe can buy eggs from Jack using bitcoin, and Jack can pay Mary for bread in bitcoin, and Mary can pay taxes in BTC, there is no need for fiat currency anywhere.

El Salvador adopted bitcoin as official legal tender a year ago. Part of the reason for this adoption was to empower the 80% unbanked Salvadorans to gain access to digital funds. And the country managed to get 70% of those people to do so in just four months.

The country has received $103.9 million worth of BTC since September 2021, and a year later, the USD value of BTC has fallen to just under $40 million. The disaffected beat their chests with joy.

But here we are again using the same flawed logic.

If countries only trade with other countries using BTC, who cares what the USD value of that BTC is? The value of the USD becomes insignificant.

In October 2022, El Salvador signed a memorandum of understanding with the city of Lugano to spread the acceptance of bitcoin. Not bitcoin though rightfully so legally Currency in Lugano – the city does not have the authority to declare legal tender in Switzerland – it de facto tender.

What if El Salvador and Lugano start paying each other in bitcoin?

Panama once floated the idea of ​​making BTC legal tender. Despite its rich mineral resources, the Central African Republic (CAR), one of the poorest countries in the world, has also adopted cryptocurrency as legal tender.

A third of small businesses in the US already accepted bitcoin as a valid payment in 2020. Major companies that accept Bitcoin include AT&T, Wikipedia, Microsoft, and Norwegian Air.

Bitcoin seems to be everywhere.

De facto currencies and government panic

De facto currencies terrify central governments. Speaking at the IV Nordic Blockchain Conference in Copenhagen, Denmark in December, lawyer Payam Samarghandi revealed that the EU’s bloc-wide cryptocurrency regulations began as an attempt to prevent Facebook from creating an actual currency to compete with the euro. After Facebook canceled its Libra currency, the regulation reached its current state – Markets for Crypto-Asset Regulation (MiCA).

Bitcoin, the idealistic cryptocurrency that is not controlled by any government on earth, can now be used to buy the goods in many parts of the world.

If it can be used to buy bitcoins the goods – like quartz, copper, uranium, iron ore and many other minerals found in the CAR – bitcoin’s value becomes the value of supply and demand for the goods it represents.

It was the dollar itself that sowed this germ of its own destruction.

A fiat currency is a currency backed by the trust of the issuer, not by reserves.

The dollar used to be backed by gold reserves. In 1933, the US government passed the Emergency Banking Act, which stopped US citizens from exchanging their dollars for gold. Later, in 1971, the United States stopped issuing gold to foreign countries in exchange for dollars. The fiat currency of the US dollar was born.

By the same example, bitcoin is becoming one now fiat Currency. But in his case, the issuer is not a central government – ​​it is the bitcoin blockchain, a decentralized and independent entity that has earned its trust several times over.

What makes a currency?

Earl Kay Stice, professor emeritus of accounting at Brigham Young University, identifies three essential characteristics of a valid currency:

  • Reasonable limitation on supply
  • Verification capability
  • Wide acceptance.

It will never exceed 21 million bitcoins. Every transaction can be audited. And now it is gaining wide acceptance.

In gaining this widespread acceptance, bitcoin has pulled the rug from under the feet of the US dollar. At first he said, “Hey, check how many dollars I’m worth!” Investors flocked. The value of Bitcoin rose against the dollar. So was Bitcoin adoption.

But the real value is in the adoption, never the dollar value. So bitcoin finally said, “Who needs dollars?”

* R Paulo Delgado is a cryptocurrency writer who takes a look at the strange and human stories behind this new asset class’s always fascinating leaps and stumbles.

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