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The mystery of Bitcoin

The mystery of Bitcoin

By Muhammed Yaseen Published 2 years ago 3 min read
The mystery of Bitcoin
Photo by Bermix Studio on Unsplash

The question arises as to what will replace fiat currencies (paper). In the past the answer has always been precious metals but today there are cryptocurrencies as well, whose enthusiasts are more aware than most of fiat money’s failings.

Needless to say, Bitcoin has also been taking headlines. Originally designed as a digital cash system, Bitcoin’s noble vision as an electronic wallet for non-dilutable “coins” in fiat world gone mad was soon usurped by its use on the Silk Road.

In the markets, there is considerable uncertainty over the monetary qualifications of leading cryptocurrencies, particularly bitcoin. Other than mainstream investors, who still cling to the Keynesian creed, there is an emerging crypto cohort who have so far not addressed the subject of a possible replacement of fiat adequately, riding high on recent price gains for bitcoin and other cryptocurrencies, which they persist in measuring in dollars and other national currencies.

Such shady uses are less discussed today as Bitcoin makes greater inroads into the main stream consciousness.

That said, Bitcoin is not alone, nor even supreme, as a payment tool.

Over the last decade, payment tools like Cash App, Zelle, Apple Cash and Venmo have emerged allowing transfers to take place in seconds for reasonable fees.

Bitcoin fees are around $10 per transaction, but almost no one is buying Bitcoin for such transactions, as other tools are superior.

But, again!! What really is Bitcoin? Is it an online cash system?

By André François McKenzie on Unsplash

Is it a truly safe, un-seizable “digital gold” that will protect holders from debased fiat currencies

The simple truth is Bitcoin holders are getting rich by just watching its value rise in their Coinbase wallets, not because they believe Bitcoin is (or will be) the next medium for grocery or car purchases.

For Bitcoin holders, the only thing on their minds and e-wallets other than instant wealth has been the cost of electricity needed to mine more of these magical coins as concerns rise about straining, or even killing, the electronic grid where coins are “mined.

Of course, like any new toy in the markets, room for abuse and fraud is equally possible, if not tempting.

There is growing evidence, rather than mere theory, for example, that Bitcoin’s astronomical rise has been artificially manipulated, in part, through one or more stablecoins, including Tether.

Without getting too complex, Tether was a coin allegedly promising a one-to-one USD backing.

There is concern, as well as growing evidence, that USDT agents were minting Tether coins out of thin air (much like the Fed creates dollars out of thin air), and then using those magically created USDT coins to buy Bitcoin on exchanges like Bitfinex.

Bitcoin defenders, of course, have been very busy of late downplaying the Tether story, but the potential for fraudulent Bitcoin price manipulation now and going forward simply can’t be ignored.

Such concerns would make Bitcoin more than just a mania bubble—but something far worse: An artificial asset driven by artificial demand from other artificial coins. A veritable castle in the sky, of which the digital world will see many more.

This is probably the most important reason cryptocurrencies cannot act as money. Their innate volatility and inflexibility render them unsuitable for the financing of production. And without the money function the idea of bitcoin continuing to act as a store of value is only possible until the successor to fiat is a stable form of money. Whatever that outcome turns out to be, a return to monetary stability will make hoarding money largely redundant, replaced by personal liquidity relative to anticipated purchases of goods, and savings, whereby hoarded money is invested in and loaned to businesses. If the successor to fiat is to be bitcoin, it will have to survive this radical change of use.


About the Creator

Muhammed Yaseen


Graduated banking and finance.

Like to read and keep updated with politics and finance.

Expert in finance

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