The world between the reliable volatility of cryptocurrencies and the unsettling stability of fiat currencies.

in LeoFinance3 days ago

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Every time I hear voices criticizing Bitcoin accusing this decentralized digital currency of fraud, a high-tech scam and even of being video game money (my cousin tells me that all the time) the more I applaud my decision to join this new 21st Century economy. Step by step I can perceive how more and more friends and relatives are interested in starting their first investments in this era of digital money since it is undeniable its power against the old fiduciary regime.

This dichotomy between the fiduciary mode versus the digital model reminds me of the famous scene in the Matrix movie, in which the protagonist (Neo) must decide between a red pill that will make him wake up from that dream that kept him away from the harsh reality and see that the world is shit or, ingest a blue pill that will keep him asleep as one more among millions of human beings at the service of a great puppeteer.

The transition to the digital era will not be easy but it is unstoppable, however before forcibly convincing people it is necessary to tell them where they are going to go, because for the vast majority of human beings there is nothing that produces more fear than the unknown. The first thing that needs to be said about cryptocurrencies is their particular price volatility or value, a characteristic that makes them a risky investment and at the same time very successful if you know their fundamentals.

In the long term, most cryptocurrencies, especially BTC, have proven to become more valuable over the years. Just imagine that 11 years ago someone paid 10,000 BTC for a pair of $40 pizzas and you will realize the magnitude of the growth and impact of the world's leading digital currency. Imagine for a moment if instead of spending the BTC on a pizza he had saved them, today he would have in his wallet 560 million dollars with which he could buy the pizza if he wanted to.

On the other hand, this pizza story demonstrates the reality of the fiat model, which is constantly devaluing over time. Slowly or quickly (depending on the country) fiat currencies will always lose value year after year, which is why those who depend on this form of money often resort to debt as an escape route to maintain their status of life. But the problem of living on debt implies that you live at the mercy of an institution to which at any moment it will be impossible to pay your commitments, unless you have direct access to the money printed by the central banks (the Federal Reserve for example).

Unlike BTC, fiat money requires constant issuance of money in order to balance the economy of each country, however this implies that this money will lose value day by day, month by month or year after year. There will be times when a fiat currency will revalue against other currencies, even against other commodities or against BTC, but most of the time it will always be at a disadvantage with respect to the aforementioned values, especially BTC.

Likewise, BTC will act volatile with respect to its price, but being a limited, decentralized and highly valued currency among the new generations we are all confident that the same will never change its course to the top of the charts. It is precisely the trust that makes the BTC so successful being a project whose author or authors is or are totally anonymous but managed to establish an invention as disruptive as the printing press was in the 16th century.

Today the fiduciary model is crumbling, people are realizing that this form of money that appeals to the confidence of the population in the issuing entity no longer generates wealth, therefore the credibility of those who print it is diminishing. Before it seemed crazy to invest in short (fall in value) of US Treasury bonds, the main economy of the planet, but now this is one of the main bets of the wolves of Wall Street. While BTC continues to gain followers and new investors who no longer find the volatility of this cryptocurrency high risk, they already know that in the long term nothing beats it.

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