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[MCS Trading Academy] Reason Why Bitcoin Will Dominate as a Currency

3 months ago

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Quantitative Easing (AKA Philosopher's Stone)

 

To explain why Bitcoin is bound to rise, you must understand quantitative easing. This is because Bitcoin was created to stand against quantitative easing.

     

So what is quantitative easing?

Quantitative easing means a policy by which the government prints money to provide additional liquidity to the market.

   

Quantitative easing has been expressed as printing money, but the specific methods may vary. The base interest rate can be lowered to near 0% or even enforce a negative rate. The bank's cash reserve ratio may be lowered as well. Furthermore,  it is also possible for central banks and governments to purchase government bonds and corporate bonds directly to release cash into the market. In addition, quantitative easing may include subsidizing cash directly to the public or spending large amounts of money by the government to run large government projects.

   

Why does quantitative easing exist?

This is to provide additional liquidity to the market when the economy is in recession. To sprinkle money on the market which stimulates consumption and allow the cash to flow in the economy again. Quantitative easing can rejuvenate a stagnant economy, so it may seem like a simple and smart economic policy.

 

However, there are some deadly traps hidden in the philosopher's stone, quantitative easing. A sharp increase in cash volume causes inflation. As inflation lowers the value of cash, the value of cash saved by the citizens working diligently disappears into thin air. Also, increased liquidity cannot be evenly distributed across the market. Liquidity that is not allocated are often invested and is concentrated on stocks, real estate, etc. In the process, the income gap between those who have investment assets and those who do not is widened. It is a policy to save the recession, but some benefit from it and most others suffer the intangible damage. Stealing my money in front of my eyes is easy to notice, but if I lower the value of the money itself, it is not easy to notice and there is no way to stop it.

 

   

           

An Alternative to Quantitative Easing - Bitcoin

 

Unlike the fiat currency issued by the central bank, Bitcoin has a limited issuance and total amount. Since the amount does not change according to the policy of the country or financial institution, it can effectively prevent the decline in value due to inflation. Bitcoin is evolving to be accepted as a currency and is similar to gold in that it has limited supply. However, in the mining process, no processing is required, it can be accurately divided into very small units, and it can be said that it is superior to gold for easy transmission.

   

Accepting Bitcoin means adopting a new gold standard. Furthermore, it can be the backbone of a democratic economic system in that the new economic system is directly determined by individual Bitcoin users, not representatives of some countries.

 

   

           

Conclusion, What Bitcoin has to Overcome

Of course, Bitcoin is still in beta in terms of adoption and there are many challenges to solve with many negative connotations attached. However, trust in fiat currencies will continue to fall unless the conditions in which key currencies continue to abuse quantitative easing and large financial institutions are disrupting the market are fundamentally unchanged. Bitcoin has gradually expanded its territory for 12 years and will continue to do so. However, carefully guess whether Bitcoin's true success will be achieved through the failure of fiat currency, rather than the excellence of Bitcoin itself.

   

                 

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Published 3 months ago