Bitcoin has the potential to be the new monetary base in the world.
Flooding the country with decrees at a time when the economy was hit hard by the coronavirus wreaked havoc in the USA. Last week, the Federal Reserve announced several new lending programs that involve infusing an additional $ 2.3 trillion into the American economy.
Even the Bank of England said it would temporarily help the government’s cash flows and provide a temporary source of additional short-term financing. Although this raised concerns about inflation, interestingly, it was Bitcoin and Gold that stood out.
Popular Bitcoin enthusiast and researcher at OpenNode and Tantra Labs, Nik Bhatia, in a recent podcast, said the cash credit system is “unsustainable”. When there are big bubbles of debt, they start to collapse and that’s where, according to Bhatia, the Fed comes in and avoids the collapse and “just extending bad debts to infinity”.
Looking at Bitcoin and the cryptocurrency market, it can be seen that there was growing institutional support after a liquidation in the previous month, the market appears to be on the road to recovery. As Bitcoin matures, could it be used as a monetary base in the future? Bhatia seems to be optimistic about this.
“Bitcoin is just another asset on which you can base a monetary system. It is the new gold from that perspective. My view of Bitcoin is as a monetary base for the future, as gold was the monetary base of the past. ”
Bhatia, who is also a professor at USC, also went on to talk about the coexistence of the asset-based monetary system as well as the monetary credit system and added:
“In an asset-based monetary system, which we have had under gold standards, throughout history, this does not mean that you cannot have a monetary credit system, but you do have an explicit disciplinary restriction on issuing money. And this is really the best model for a monetary system going forward. “
Interestingly, in the early 20th century, most countries in the world used the gold standard as a means of managing the value of national currencies. But that ended soon after the economic rupture spurred by the First World War. After that, countries turned to the fiduciary monetary system. But asset-backed currencies have their own advantages.
For example, its value cannot be manipulated by a central authority with its values established by the economic principles of supply and demand. One of the most controversial implementations of this type of system is Venezuela’s oil-backed currency, Petro. But Petro remains involved in controversies, as the country’s economic problems remain intact.