Long before the disruption of the global economy following the covid-19 pandemic, Max Bronstein was already voicing his concerns about the global monetary system. Regretting the fragility of it, he pointed out that the volatility of currencies which reached historically low levels made them vulnerable. The analyst goes so far as to assert that ‘Fireworks’ hit the global currency market and that Bitcoin (BTC) could be the big beneficiary. Back to what the person said.
The vulnerability of currencies in the service of Bitcoin
M. Bronstein explain that currency vulnerability is due to the huge debt and especially the low dollar reserves at the level of many nations. He thus cited the Argentine peso, the Turkish lira and the Brazilian real as an example as currencies with low dollar reserves.
Regarding the Argentine peso, he has indeed recorded an inflation rate of 42.1% in May 2020 as evidenced by data from Trading Economics. A situation that would benefit Bitcoin according to the analyst because the fear of hyperinflation, massive currency volatility and currency devaluation persists.
“In all of these cases, the volume and weakness of currencies will come primarily from a government’s need to devalue its currency. Bitcoin stands in stark contrast, as it cannot be devalued by a central state. In a regime where almost all governments are encouraged to devalue their currencies, few monetary systems have as much to gain as Bitcoin. Never before has an open-source competitor for fiat currencies been so necessary ” explains M. Bronstein. The question now is, when will this happen?
An impact that will manifest itself over the long term
While it is true that fears of currency devaluation and hyperinflation can boost demand for bitcoin, this shouldn’t happen immediately. It will already be necessary, for example, that the perception of cryptocurrency as a store of value is spreading. Only in this way will Bitcoin establish itself in the market as an alternative to currencies that are in prolonged decline.
Some countries like Venezuela and Iran already seem to be undergoing some effects from the situation described by Mr. Bronstein. Indeed, in these two nations where national currencies have experienced hyperinflation in recent years, Bitcoin is starting to be used more and more as a means of payment. As this trend continues, the same scenario should be seen in other countries facing similar problems.
If they do not completely replace the constantly devalued fiats, Bitcoin could coexist with them in the long term. But before that happens, governments should already be working on developing an infrastructure that supports cryptocurrencies to facilitate their daily use.
In the crypto-bath since 2017, both far too late but far enough early from the point of view of my future grandchildren 🙂
Writer, Amateur Trader, Ethereum and NEO-compatible