Bitcoin is a store of value like never before, especially now that it will be used by the US government as a treasury asset, but also because of its complete intangibility and fixed programmability. In this sense, Bitcoin represents an evolution in the history of money and finance.
Bitcoin reserves cannot be hidden
First of all, because Bitcoin imposes a completely public and in real time which limits the arbitrary power of governments over their BTC-denominated treasury assets. The crypto asset has these gifts because it is a network independent of the traditional and official means used for fiscal accountability, which are mostly pseudo-public or directly privatized systems.
To account for the expenditure of public money, governments must publish annual budgets, quarterly reports, audits and financial statements. When there is good faith and a claim to transparency, those responsible for reporting on government cash flows can still make mistakes in reporting their obligations with fiscal resources. When faith is bad, they can adulterate these reports and those of their reserves at their convenience, disguising accounts, movements, expenses and other financial actions.
Bitcoin as a store of value implies that, once the addresses where governments’ reserves are housed are identified, the need for public trust in such reports disappears. Citizens will be able to know and confirm on their own how and where, if any, government treasury funds move (as long as they are in bitcoin).
Although only a fraction of the United States treasury will be in the crypto asset (BTC), this represents a fundamental advance in terms of state transparency. It is expected that this transparency will increase if BTC begins to be considered, thanks to the security of its network for making payments, as a circulating asset; that is, as an asset suitable for immediate financial operations, such as spending or currency convertibility.
Bitcoin deflation
Secondly, because bitcoin is a deflationary currency, so it tends to revalue over time. Bitcoin is subject to economic cycles, the same as fiat money. But the nature of these economic cycles differs radically between one asset and another.
Fiat money business cycles depend on centralized decision-making by a minority which attempts to balance the inflation of fiat currency with the stimulation of the economy in a deterministic game.
When dollar inflation is too high, the central bank reduces the issuance of the currency and increases interest rates, temporarily slowing the economy and limiting consumer spending. When they manage to control inflation, the same entity lowers interest rates and increases the issuance of money, managing to stimulate the economy through spending. These cycles repeat over and over again.
As it does not have a fixed, unchangeable supply, but its issuance is dependent on the macroeconomic context and variables such as the employment index, the dollar tends to devaluate in the long term, the same as any fiat currency. This is because necessity exerts more evolutionary pressure than excess. The people who decide about the economy They tend to issue, in the long term, more money than they take out of circulation.
The economic cycle of bitcoin, on the other hand, does not depend on a few human beings trying to regulate economic relations. Its economic cycle is not arbitrary, contextual; does not tend to seek the zero point of equilibrium (break-even pointin finance), and depends on the global open market and the fixed programmability of its protocol.
The price of bitcoin rises cyclically because each halving reduces the block subsidy by half, creating programmed shortages and shock in the offer. It also rises because each cycle, the demand for new actors, especially large capital, increases. The value of Bitcoin, therefore, will not depend on what governments do or do not do (although this does influence), but on the global market in general.
The intangibility of Bitcoin as money
Ultimately, Bitcoin is the most perfect and successful example of a virtual money machine with total intangibility. Bitcoin is a completely native currency of the digital world and the Internet. It exists due to advances in computing, computing, programming and cryptography. It is, therefore, the first legally tolerated and globally appreciated currency that does not derive from a physical asset nor does it function as the “tokenization” of one.
The consequences of bitcoin’s total intangibility are yet to be investigated and understood. Despite this, it can be assumed with reasonable certainty that this closed digital fixed money system has superior programmability and security compared to traditional money systems and digital systems (of partial intangibility) that led to electronic money, which remain philosophically and structurally anchored to physicalism.
Disclaimer: The views and opinions expressed in this article belong to its author and do not necessarily reflect those of CriptoNoticias. The author’s opinion is for informational purposes and under no circumstances constitutes an investment recommendation or financial advice.
