Bitcoin could be a panacea for income inequality, says Forbes
???? Do you want to work with us? CryptoSlate is hiring for a handful of positions! Bitcoin (BTC) has the potential to solve the problem of income inequality in the world, since it can behave as a commodity and an asset at the same time, and have its price set by market demand, according to [...]
Do you want to work with us? CryptoSlate is hiring for a handful of positions!
Bitcoin (BTC) has the potential to solve the problem of income inequality in the world, since it can behave as a commodity and an asset at the same time, and have its price set by market demand, according to a analysis of Forbes.
Today, investing in tangible assets is the most preferred method of providing a hedge against inflation, as they are the only types of assets that increase at a rate similar to inflation. While it seems like it can solve the problem of hedging inflation, it further divides the income gap.
The article says:
“The significant increase in the price of hard assets reveals a broader problem with global economies. That is, polarization in the economy. This refers to the problem of inequality in which the 1% own the most hard assets that the 99% must continue to pay for.”
The pandemic has played a significant role in polarizing the market for tangible assets. Initiatives like securities-backed mortgage campaigns issued by financial institutions created cash flow. However, due to pandemic conditions, financial institutions were unable to invest these funds. That is why they relied on hard assets, which polarized the market.
Even as the effects of the pandemic fade, the polarization is far from healed. Current events, such as the Russo-Ukrainian conflict, continue to drive up food, gasoline, and shipping prices around the world. The result is ever-increasing inflation and a deeper polarization of the market for tangible assets.
How can Bitcoin solve this?
The article argues that the global economy is not going to heal on its own. It states:
“If the situation worsens, governments will be forced to print more cash in the form of universal basic income (UBI). This new money can be distributed using a bottom-up logic to ensure that the average household can afford basics like food, shelter, and health care. The rich 1% will get richer, while the poor 99% will get poorer.”
Prices and coverage
Bitcoin is a commodity and an asset at the same time. In addition, its price is determined by market demand. The supply of Bitcoin will decrease because of its code, and as companies continue to invest in it, the demand and price will only increase in the future. This increase is very likely to exceed inflation rates. Therefore, Bitcoin works best when it comes to storing value and providing a hedge against inflation at the same time.
Another advantage of Bitcoin is that it gives full ownership to the holder. In other words, it cannot be seized or manipulated like tangible assets like real estate, energy, or land.
This provides exceptional benefits in political or economic challenges. Cryptocurrencies come to the rescue in case of war, like in Russia, or unusually high inflation rates, like in Turkey.
Will Bitcoin rescue the world economy?
While it is absolutely clear that the solution is in Bitcoin, the article also notes that it is not quite ready for action.
Despite arguments suggesting that Bitcoin is decoupling from the traditional market, the article says that it is still highly correlated with movements in the traditional market.
Bitcoin will remain a transactional currency until it properly separates itself from the traditional market and begins to behave individually. When it does, it will also become a proper store of value, giving Bitcoin the power to save the world economy.
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