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Central Banks Love Bitcoin, Here’s how ?

The most prominent critic of the cryptocurrency industry is the Central Banks, a monetary authority that makes paper money valuable and a legal tender. They’re backing the cryptocurrencies secretly.

They argue that bitcoin and other altcoins will bring instability to the market because of their volatile nature and inability to hold value. The truth is that these guys indirectly support its growth. The prominent players in the cryptocurrency industry are not Bitcoin or Ethereum but stablecoins.

Stablecoin: A cryptocurrency asset pegged to a real-world asset that has a stable value. The most used cryptocurrencies are stablecoins backed by USD as they bring stability to the market and protect traders and investors against volatility.

Now let’s think through this, if there is no stablecoin in the market, Bitcoin value is nearly determined to be 0 as it has no authority determining its value or a central element determining its purchasing power. So basically, the USD is the one that gives value to bitcoin & other cryptocurrencies, and people call it the “Stability Provider of Crypto.”

So people are parking their USD in a custodian account and purchase bitcoin, which means the USD in circulation is converted into bitcoin in circulation, but the net USD that the US-Government mints remain stable and constant. For some people who argue that bitcoin’s value is out of thin air, and it’s nothing, think twice you’re just compounding your USD against inflation.

Bitcoin: It’s a digital version of USD + Gold. Bitcoin doesn’t create any new value in the real world. Instead, it translates the minted USD into a less fungible asset. So bitcoin is itself has a value promised by central banks to be a legal tender.

Now bitcoin is just a tool for protecting your dollars from losing their value. Since fewer dollars would be in circulation, the value of dollars will also remain intact.

Fungible to Less Fungible

So investment in Bitcoin or “Other Fixed Circulation” cryptocurrencies can be seen as a transitionary element between the more fungible (ability to be newly minted) USD which will be printed every day in billions, to a less fungible Bitcoin (a few ones rewarded to miners on each block).

So by virtue, you get to protect yourself against inflation & growing dollars in circulation. It also helps the government curb the total dollars in circulation, thereby increasing the economy’s stability.

Opportunity for all

We all are aware that bitcoin is a global currency that is a derivative of the United States Dollar (in the name of “Stablecoin”) and Gold (in terms of “Fungibility”). So it helps people from every part of the world store their assets in a relatively more robust medium rather than their national currency.

My nation’s currency INR lost 100% of its value to USD in the last ten years. So if I had $1000 equivalent of INR in the bank by 2010, I got $500 equivalent. Since national currencies are losing their value against the USD because of rapid technological growth and the pooling of talent across the globe, it gives people access to the US economy.

Price Prediction of Bitcoin

So with almost 18.727M bitcoin’s in circulation as of the current date against 6400 Billion Dollar. Then if 10% of the total dollars are parked to protect themselves against inflation it would value every inflationary hedge “bitcoin” at $ 34,175.254 which is the current valuation of bitcoin. So it means 10% of dollars are parked in Bitcoin. This is just with one economy, still, we’ve major ones that are using bitcoin. So bitcoin is currently at a huge discount and will go up from these levels very quickly. The major catalyst for such movement is the ease of conversion of national currencies to a stablecoin. Not just USD, we need stablecoin in almost all national currencies.

So it’s only benefitting US Governments?

Currently, it’s the reality, but not for so long. However, we can change this by issuing stablecoins backed by all national currencies and pooling them to Bitcoin’s core value.

So that bitcoin could generate its stability from all the 192 countries of the world, making it the world’s most successful asset ever invented by humanity.

Investment in cryptocurrencies is safe in the longer run, taking into account the market’s inherent stability. After that, it’s just a transitionary event from a more fungible to a less fungible natured asset.

Trading in cryptocurrencies is volatile as people are willing to take advantage of the vast user base with various sentiments and react wildly. So secretly the value of Bitcoin is derived from the central banks and hence it will never be banned from usage as it helps them stabilize the economy and value.