Ah, Bitcoin! The very volatile asset that’s been forever rumored as the perfect hedging tool against fiat currencies. It is perhaps the most controversial currency in the past decade. With skeptics calling it “ponzi scheme” or “monopoly money” and with optimists calling it the real money with obvious max supply, it has certainly become the most debated currency in the recent time.
Whatever people think of it, there’s actually a very strong argument about Bitcoin being the only viable hedge against future fiat failures. Here’s why.
Bitcoin Was Created From Financial Crisis
At the end of the day, fiat currencies have become a monster that they tried to solve in the first place. Fiat currencies have become unbearable with never-ending money printing that we pay through inflation by the day. While inflation was not really bad in the first place, the fact that human salaries have never really grown has become a global problem. On top of that, the wealth gap has become very extreme, and people are really tired of it.
The global financial crisis in 2008 has taught us one or two things. The problem with fiat currencies is that governments never really have any problem to get out of it. Especially when it comes to USD, as the world’s reserve currency, and the willingness of the US government to do anything to make sure they don’t lose that status. And yes, because the USD is the world’s reserve currency, they can just keep printing it without causing too much trouble.
Bitcoin, on the other hand, was created to be the opposite of this exact problem. Satoshi Nakamoto, the creator of Bitcoin, decided to create a halving mechanism every approximately four years. He also believed that a magic number had to be created to help price appreciate over time. That magic number is 21 million.
As proven by this year, Bitcoin has been doing well during the time of the global pandemic and financial crisis. It has fulfilled itself against fiat failures (so far) despite the fact that its growth is slower than many altcoins.
Other Cryptocurrencies Might Fail But BTC Will Survive
Even though BTC has somewhat passed its first real test of the financial crisis, it’s still doing much worse than many other altcoins, especially DeFi-related coins. Those yield farming tokens like YFI, SUSHI, COMP, and others have been doing extremely well in the past few months. Almost all major blockchain platforms are rushing to build or support their own DeFi projects. Tron, for example, has launched its SUN yield-farming token. NEO also has announced its own DeFi project called Flamingo.
The thing is that none of these trends would last. Just like the trend of ICOs back in 2017 or IEOs back in 2019, yield-farming craze might subside anytime soon. While crypto traders start to embrace the idea of inflation with these tokens, everybody knows the growth is not sustainable as the prices keep moving upward very fast.
And this is where BTC shines. Altcoins come and go through a boom and bust cycle but Bitcoin remains on the top of the pack. At the end of the day, you can trade this coin and that coin but you remain true to a tried and proven cryptocurrency if you want a hedge against falling fiat currencies. This cryptocurrency is Bitcoin (and perhaps some other top altcoins).
Crypto Still Largely Untested
Despite the fact that BTC has been doing generally well this year, it’s still largely untested. There are some psychological barriers in the crypto space that might make it hard to retest 2017’s bull market peak. Yes, although DeFi tokens have been stealing all the attention, the general market cap is still much lower than the peak of 2017’s bull market.
In order for Bitcoin to be able to steal the headlines again and prove its worth to the outside world, it has to make a new high. Unlike gold where it keeps making a new high in every crisis year, Bitcoin is still not there yet. Once it is able to cement its place, it should be able to prove all the doubters wrong. Hopefully, BTC will become that viable hedge against fiat failures.