Nobody has a monopoly over the proceedings of bitcoin and that is why it is so problematic for the banks. The banks believe in consolidation and making more money from the money they already have and keep tight control over the proceedings of the money through a centralized control over the resources. Due to these measures, banks can have a lot of problems in their running that are beyond their control.
Bitcoin is now eating away into the shares of traditional banking and payment transaction conglomerates. It is the reason why banks are lobbying hard with conventional economists to portray bitcoin as a bubble waiting to burst. Why should bitcoin be considered as a bubble waiting to burst? What is at the back end of bitcoin that imparts value to bitcoin? You surely must have asked these questions yourself and now I will answer them.
Bitcoin is not a big bubble and cannot result in a much heightened crisis like the Wall Street Crash of 2008. The Wall Street and the stock exchanges around the world along with the banking industry giving out debts over money they don’t have are the real bubble.
The stock market is pure speculation and nobody knows the ground realities of the companies they are investing in, there is insider trading, securities fraud, divided fraud and what not in the stock exchange. While the successive government have tried to rein in the stock exchange, the truth is that the stock exchange is the worst example of a free market because it hasn’t learned to autocorrect itself in an appropriate
Same goes with banking. Banks are known to give credits in a biased manner and to the industries that they think won’t make losses. They therefore don’t invest in good promising projects and rather remain interested in conventional ones like real estate, personal loans, energy and infrastructure. Banks go above and beyond in these industries since they consider them safe enough for investment but the truth is that they often end up investing more money that they can hope to reap up in case of a market crash. Take real estate for example.
Real Estate suffered a big crash back in 2008 when the whole system collapsed. As a result, billions of dollars were wiped out from the market and the banks were facing huge losses and not ready to accept the properties back. Since they had invested the money on real estate blindly, they would end up being one of the biggest losers and many of them would end up being bankrupt and would need a bailout package from the government just to start operations again. This leads to consolidation and concentration of human wealth and not at all what the free market should be all about.
Free market is about decentralization, small businesses and people coming up with new ideas to solve our problems and innovative solutions. So, first of all, a lesson in “bubble” mechanics from an industry that is very much a bubble in itself and is guilty of violating the free market and blind consolidation, you should take a step back and ask yourself whether they are the best source of information in this. Yes, they are definitely not. They more often that not even know the basics of blockchain and bitcoin and then make tall claims about its eventual failure. Try asking conventional economists about blockchain and decentralization and you would be amazed with the answers pouring from their mouths.
But, still bitcoin needs to address these concerns to counter the negative propaganda being aired on these channels and even taught in universities. It is better to nip the evil in the bud! So, first of all saying bitcoin has nothing on its back end is just not true. It has a lot of infrastructure on its back end and you cannot see it but experience it the way it is being handled.
For those who say they don’t trust a system whose infrastructure they can’t see, they should immediately stop using international transactional companies, Google, Dropbox, etc as you are 99% likely not to see their infrastructure with your own eyes or even have it telecast in your entire lifetime. The reason why you can’t help trusting them is that you have seen how they work and you need them. Now these companies don’t even show how they work to the public. All of it is kept under wraps. Bitcoin however is open-source.
We know a lot about what is happening around the world. We can literally follow each transaction and its confirmation while the blockchain itself is the safest open-source transaction in the entire world. So, bitcoin is not only safe, you can study about it and even start a node yourself to understand and operate its transactions. It bring a whole new level of transparency to the monetary world, one that was absent before in banks and other financial institutions.
Now what is at the back end of the bitcoin? What makes it worth hundreds of billions of dollars in marketcap? Well, for starters, I must ask a counter question.
Why are payment companies like Visa, Mastercard, Paypal, etc worth more than $ 3 trillion in total?
The reason is that you can send and receive money globally in secure transaction due to their good infrastructure. Bitcoin can do exactly that without companies like these keeping track of everything and in a peer-to-peer transaction.
It is also much more secure than any of these companies. So, a better transaction system like bitcoin possesses should be worth a lot more don’t you think? The worth of bitcoin is partly from this role as a payment method which is based on the revolutionary blockchain technology. Each transaction of bitcoin has significant contribution from miners, people who make this network secure. So, at least part of its existence and worth is justified and even justifies astronomical increases in the near future as it eats away into the shares of these companies. It is happening whether they like it or not.
Now what imparts bitcoin’s intrinsic value?
That’s the amazing part. Bitcoin’s worth is entirely calculated by the dynamics of a real free market. That is why it is so volatile. When people see that they can send/receive money in the form of bitcoin and even hold it for the future gains, they understand that bitcoin has the capability to undermine not just transaction companies like Visa, Mastercard and Paypal but also central banks who control the major currencies in the world.
These banks literally control the worth of currency and try to make it as stable as possible using artificial measures. These measures include printing more money for devaluation, holding up new bonds away from the market for stabilizing its worth and much more. The system is rigged because of these hard-handed measures and centralized decision making.
Why is it that devaluing currency is almost a certainty despite the ever-growing economy. Why is it that a dollar in the 90s is worth a lot less when you go out to buy something from the store? The reason is that the system is designed to devalue the paper currency no matter what because they know that they will need to keep printing more and more bills as times goes by. This doesn’t happen with bitcoin.
Bitcoin’s worth will increase or decrease according to the value imparted to it by the free market and that is beauty of it. It doesn’t attach fake valuation to the currency. Coupled with the amazing transaction system, it will always change in the future and that doesn’t happen with the fiat currencies like Dollar, Pound, Euro.
Since the price of the bitcoin is the reflection of the free market confidence in the currency, it is much more real than fiat currencies that give rise to yearly inflation and such. It is perhaps the same reason why governments around the world are cracking down on it. They simply don’t like a currency they cannot manipulate and post made-up statistics regarding the economy and its future. It basically tells the worth like it is.
So, due to all these attributes and millions of computers in a decentralized network protecting bitcoin, the worth of bitcoin continues to increase. It is not a bubble but it gives no guarantee what its future price will be. It might decrease rapidly or increase rapidly according to the trade and commerce happening because of it.
Bitcoin was designed to be a currency of the people backed by a stellar infrastructure and driven entirely by the free market. No fiat currency in the world can claim that but it does have competitors that keep its price in check and its own unique currency market as well.
So, the next time a banker or conventional economist tries to portray bitcoin as a bubble, you can analyze his arguments keeping in mind these simple talking points.