Whilst there is a myriad of cryptocurrencies in existence today, the most popular of these cryptocurrencies is Bitcoin. In this article, we imagine and examine the effects and how the world would operate under a said “BITCOIN Standard”. We also look to reinforce the belief that only a single cryptocurrency would be the standard. This is Bitcoin, ShibaCoin, and the Age of the new monetary system.
There may be some skepticism at this point as to how it could come about that the bitcoin standard could ever be adopted, even by a single country. A major reason for this skepticism is the fluctuations in the price of bitcoin relative to the U.S. dollar since its inception in 2009.
Whilst this may be true, it’s worth reminding ourselves that as Bitcoin is adopted by more and more people the price of a single bitcoin will trend upwards. Once the price of a bitcoin has reached saturation the supply would no longer increase. This means that if you adopt bitcoin now and it does get adopted as the monetary standard, then you can be confident that the price will go upwards from today’s prices. This is called Stock to Flow.
What is Stock to Flow Ratio?
It is difficult to significantly increase their supply i.e. the process of searching for gold and then mining it is expensive and takes time. Bitcoin is similar because it is also scarce. In fact, it is the first-ever scarce digital object to exist. There are a limited number of coins in existence and it will take a lot of electricity and computing effort to mine the 3 million outstanding coins still to be mined, therefore the supply rate is consistently low.
This means that as bitcoin gets closer to a full supply mining future bitcoin gets ever more difficult to mine. The price of bitcoin has been correlated with the stock-to-flow ratio since inception. See below:
What Actually is Money?
Money as today has it is simply a note with a value printed on it. This has arbitary value and we are told it has a value by the value of goods that we can purchase with said dollar note.
For money to be adopted it needs to be readily transferrable across space and time. This is the reason for the US Dollar being so widely accepted today and the reason why a vast majority of international trade is conducted in USD. (Why would anyone want to transact in Zimbarbeian Dollars, as one would need to transfer this numerous times to get it into a currency of any meaning. This is also the reason why we believe there will only be a single digital currency of value. If multiple currencies were to exist alongside each other it would create friction between currencies, hence the reason why over time the silver has been phased out and not used alongside gold for a store of value. (there are also other reasons for this).
You need to remember that money used to be shells on a beach or salt from the salt crop. Money is only destroyed when there is an oversupply and its value trends to nil. Hence as bitcoin is a limited financial asset there is no risk of oversupply (there are other risks that we see, however, we will go into this in a future article.
Prophet is a big fan of bitcoin and bitcoin only. We firmly believe a single currency will rule them all and other ‘fad coins’ will be not adopted and there will be too much friction to convert between these ‘fad coins’ hence most will fade away in the foreseeable future.
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