Is Bitcoin becoming the new gold?

Bitcoin has been hailed by some as the new gold, but this comparison is far from accurate. The idea of Bitcoin being equivalent to gold is not grounded in reality, and it certainly does not mean a return to the gold standard, which had disastrous effects on the world economy.

In the past, the value of global currency was tied to the value of gold, with the assumption that currency could be exchanged for a fixed amount of gold. This system was believed to prevent inflation by restricting the creation of new money. However, this theory failed to consider economic growth, which requires an increase in the money supply to accommodate a growing economy. Restricting money supply while trying to grow results in deflation, leading to decreased spending, recession, and depression.

Bitcoin enthusiasts argue that the limited supply of 21 million Bitcoins will prevent inflation, as the fixed number of Bitcoins should keep prices stable. However, the volatility of Bitcoin’s value undermines this claim, with its price doubling or halving in a matter of months. Contrary to the notion of stability, Bitcoin’s price fluctuations indicate its unsuitability as a hedge against inflation.

Moreover, Bitcoin cannot be compared to gold as it lacks any intrinsic value or utility beyond its use as a digital currency. Unlike gold, which has industrial applications, Bitcoin exists solely as a digital entry in an encrypted ledger. It holds no tangible value and is not widely accepted as a means of payment, as its value is often translated into traditional currency for transactions.

The suggestion of building Bitcoin reserves akin to Federal reserves is concerning, as it artificially creates demand for a limited supply of Bitcoin, driving up prices and benefiting current Bitcoin holders. This approach, aimed at establishing Bitcoin as a reserve currency, resembles a Ponzi scheme that capitalizes on government funding to boost private wealth.

Advocating for the US to adopt Bitcoin reserves as a step towards making it the global reserve currency is a dangerous idea that threatens the stability of the world economy. Embracing Bitcoin over government-backed fiat currency poses a significant risk, as Bitcoin’s economic instability and volatile pricing make it an unreliable option for maintaining value and facilitating global trade.

In conclusion, the comparison of Bitcoin to gold is flawed, as Bitcoin lacks the essential qualities that give gold its value and utility. Believing in Bitcoin as the future of currency and advocating for government adoption of Bitcoin reserves is a risky proposition that jeopardizes the stability of the world economy. For a reliable and secure monetary system, trust in government-controlled fiat currency remains the most viable option.