Is bitcoin actually protecting fiat money?

[wantjokull]

Are we missing something here? How can bitcoin be protecting the fiat if bitcoin itself is deflator of all time. You said few things in right way, as if the more economy sources we create the more stable fiat becomes and thus inflation is reduced. But to be honest bitcoin is something that is mostly taking value out of the fiat and putting it into the virtual world from where very little money comes back into the fiat stream and thus isn't helping the economy to grow at all.

So bitcoin is like non derivative stuff which is one way ticket where mostly money gets extracted from real world to virtual world. (On large scale)

[1714793504]

1714793504

[timerland]

I don't understand how bitcoin is protecting fiat currency, at all.

Bitcoin is an alternative to fiat currency, and is literally known to be that. The biggest competitor right now to fiat currency is probably BTC itself, and it doesn't make any sense that bitcoin is also protecting, instead of rivaling(which is the case) fiat currencies. Simply absurd. It may be different if bitcoin wasn't decentralized, but it is.

If a country has attractive tax rates and regulations for the crypto industry, then its economy and its total output may be positively affected. But its fiat currency, does not.

[Mpamaegbu]

Can it be that pumping of the crypto markets is just another financial shenanigan created to keep the old system afloat?
They are creating new wealth out of nothing with cryptos, just like with derivatives. The made up wealth that is created, is actually backing the value of fiat. This would make sense why regulators seem so blind on goxdollars and tether.

Let me concern myself with this aspect of your post as it negates what I think is true. "They (the developers) are creating new wealth" quite alright but not out of nothing as you alleged. Imaginative skill isn't something that is easily picked up on the streets. It takes superior brain work to achieve and can't be quantified in monetary terms. It isn't ubiquitous or bestowed on everyone. I mean, developing Bitcoin wouldn't have been if by stroke of imagination Satoshi or someone else didn't imagine it. Again, to prove that this imagination and creation  isn't utopia, more existing companies and start ups are queuing to adopting the blockchain tech which is crypto birthed for the ease it provides for their businesses.

[xuan87]

I think no, both of them got a very different purpose, that is also the reasons why the government want to banned crypto, crypto actually can make the inflation become worse, and crypto was created not to save centralised system, but to create a new world, a world with financial freedom

[bangkit tri]

between bitcoin and fiat currency has different goals. btc with decentralized system, where many governments do not allow this system because the government can not manage financial transactions, and this is the problem of the majority of countries today

[magneto]

How does people putting money into bitcoin, either for trading purposes, or for a long term investment in order to store their wealth, help out fiat currency a single bit? If bitcoin actually goes mainstream, then it would actually mean that a lot of the reasons why people use fiat (mostly because it's their only choice) are now non-existent, and that would mean that bitcoin would pose as a legitimate globally accepted form of money.

The money that is invested into crypto now, doesn't come from nowhere. It comes from other investments, or just fiat currency itself.

Plus, your theory doesn't really make sense, since injecting wealth into the economy to cure inflation simply doesn't work, or perhaps I'm misunderstanding. Either way, I don't really get how something that is genuinely potentially going to be an alternative, if not a popular replacement of fiat is going to help it at all in the long term.

[dado7]

The biggest threat to fiat money is inflation. Inflation can be cured by injecting wealth into the economy and by that rising enough belief to keep the system afloat. This can be done for instance by occupying foreign countries and by that opening up new markets to the companies that are essential to the economy. Or this can be done by loose regulations with the derivatives markets, that will create wealth out of thin air and high hopes.

Can it be that pumping of the crypto markets is just another financial shenanigan created to keep the old system afloat?
They are creating new wealth out of nothing with cryptos, just like with derivatives. The made up wealth that is created, is actually backing the value of fiat. This would make sense why regulators seem so blind on goxdollars and tether.

This is an interesting idea.
Actually, in order to keep the economy healthy, without changing the system altogether, the inflation should be a 1-3% above the rise of the real value in the economy. Fiat money is not real value, it is just a tool made to enforce the trading (as opposed to the barter system where a lot of trading would simply be impossible or would take forever, hence slowing down the development). The inflation should always have a higher rate, not because it is some safety factor, but because, unfortunately, the complicated mathematical formulas and synergy effects inside the economic ecosystems don't allow the ideal 1:1 situation.

Now, when we've put that behind us - it is the question what cryptocurrencies are. They should be a) assets like stocks (providing the partial ownership of the project/company), b) assets like money - for providing payments. Currently, they are mostly a). This makes them only a financial derivative that the traders can use to speculate and increase their wealth. With the increase of financial derivatives in the economy, we have the increase of a financial balloon which is dangerous if nothing "real" is backing it up. Now the question is- is it. Has the cryptocurrency created enough real goods and services that are covered by all the tokens and coins that are created? Probably not at this moment.

The next step is to determine whether this increases the inflation. Is the new fiat money created when new tokens/coins are created? At the moment - no. Once when cryptocurrencies will be a legal tender and considered money, just like fiat money - then yes. At the moment the money is just being diverted into the cryptocurrency community from some other areas of the economy. Is this good or not? Probably good for cryptocurrencies but not so good for that other area that are losing their investments, being it traditional stocks or simple trading (public or consumer spending).

So, this is currently not the issue of money creation but money distribution and, hence, cryptocurrencies are not creating inflation, at least not directly (what happens inside the economy when the money moves around is another, and much more complicated, thing).

The only new wealth that is being created is only a "shift" of wealth through the shifting of the money, not the actual new wealth. No new money is being "printed" (we don't print the money anymore in the traditional sense that much, as most of the money is digital, but we can still use that term). This also means that some people are getting poorer at the same time....

[hualangktsld841]

I think bitcoin and Fiat are not antagonistic. From bitcoin development, maybe bitcoin has a protective effect on Fiat. We all know that Fiat often inflation, and bitcoin can control this very well. The continuous development of the encrypted community will promote the Fiat system to be healthier.

[bravehearth0319]

The biggest threat to fiat money is inflation. Inflation can be cured by injecting wealth into the economy and by that rising enough belief to keep the system afloat. This can be done for instance by occupying foreign countries and by that opening up new markets to the companies that are essential to the economy. Or this can be done by loose regulations with the derivatives markets, that will create wealth out of thin air and high hopes.

Can it be that pumping of the crypto markets is just another financial shenanigan created to keep the old system afloat?
They are creating new wealth out of nothing with cryptos, just like with derivatives. The made up wealth that is created, is actually backing the value of fiat. This would make sense why regulators seem so blind on goxdollars and tether.

I saw this from different point of view like people are transferring their money value into the bitcoin so the fiat money may lose its value in some years.But we are still in the early stages of adoption so it needs time to settle down and to understand what will happen.

this one I believed so, because in the near future fiat currency could possibly be disappear, because there are some other country practicing the crypto currency to adopt it and use it as payment now electronically. Imagine nowadays we have now using debit card or credit card they can buy crypto, in some other country.

[1Referee]

because in the near future fiat currency could possibly be disappear, because there are some other country practicing the crypto currency to adopt it and use it as payment now electronically.

Fiat won't be going anywhere. Governments will tokenize the fiat system to step up their game and directly to obtain more control over money flows and whatnot. In reality people won't even be noticing that much of a difference because of how they conduct nearly all their transactions digitally through apps already. I haven't touched any physical fiat in ages, and probably won't have to anymore. Every place here accepts wireless payments.

All merchants accepting wireless payments can also integrate a payment processor that will allow people to pay with Bitcoin. The main infrastructure is present already, it just needs merchants to set up applications and ready they are. Mark my words, Lighning Network + NFC is a killer combination capable of taking over rapidly. Merchants will be able to get rid of around 2% in CC fees and reward customers using Lightning with a 2% discount on their purchase. Future looks bright.

[ahmad21]

The biggest threat to fiat money is inflation. Inflation can be cured by injecting wealth into the economy and by that rising enough belief to keep the system afloat. This can be done for instance by occupying foreign countries and by that opening up new markets to the companies that are essential to the economy. Or this can be done by loose regulations with the derivatives markets, that will create wealth out of thin air and high hopes.

Can it be that pumping of the crypto markets is just another financial shenanigan created to keep the old system afloat?
They are creating new wealth out of nothing with cryptos, just like with derivatives. The made up wealth that is created, is actually backing the value of fiat. This would make sense why regulators seem so blind on goxdollars and tether.

I saw this from different point of view like people are transferring their money value into the bitcoin so the fiat money may lose its value in some years.But we are still in the early stages of adoption so it needs time to settle down and to understand what will happen.

this one I believed so, because in the near future fiat currency could possibly be disappear, because there are some other country practicing the crypto currency to adopt it and use it as payment now electronically. Imagine nowadays we have now using debit card or credit card they can buy crypto, in some other country.

I think your links and the entire process you mention is quite complex and cause and effect relationships are highly indirect. To me all of this appears quite forceful. One thing is very clear that crypto transactions are limiting or reducing the number of fiat transactions. But the crypt market has no intention of going against or replacing fiat because government will never let that happen.

[BartS]

Why do people always think that inflation is a bad thing? Remember Inflation can also be translated to demand, to make you understand deflation is when the prices of goods and services are getting cheaper as the demand is lower than the supply does giving your dollar or any fiat currency more buying power. Injecting more money into the economy does not help solve inflation as well they can also see this as an oversupply of money which can also trigger a greater inflation. Now to answer your question any investment (stocks, real estate, cryptocurrecies) is a protection to inflation as long as your returns are greater than the inflation your buying power will still be equal or even greater than what it was used to before.

People think that inflation is a bad thing because historically that has been the case, a limited level of inflation is good for the economy because it is stimulates the economy and people are forced to not store their money for an indefinite amount of time, but what we see is that governments always abuse the power of printing currency, I really do not think that I need to give too many examples because they are everywhere, in fact the US dollar has been printed massively and the only reason it's not going down dramatically compared to other currencies is because other currencies have been printed in an even more massive way.

[hatshepsut93]

First, the whole marketcap of all cryptocurrencies is too insignificant when compared to fiat economy, so it has no effect on it. This alone is enough to counter the argument that cryptocurrencies are somehow helping the fiat economy. Also, you can't just create wealth out of thin air, Bitcoin is valuable because of it's technology, but altcoins are not, they are copycats and vaporware, so this theoretical scheme of boosting fiat economy with crypto's won't work. And overall it sounds like some conspiracy theoiry, while the explanation is simple - people are making money on bullish, volatile market, prices are increasing because people expect them to increase further, but it can reverse, because the market is very speculative and only few coins have strong fundamentals.

[GoldenLad]

I personally don't see the connection between the  two. The fiat currency and cryptocurrency;  bitcoin particularly. Though, in some way, you may feel that the present of the cryptocurrency is prevents inflation just because the adopted the use of cryptocurrency. But you should bear in mind that the two are totally different because speaking of the usage of cryptocurrency, most people hold for a while while people just spends fait currency.

[Vannie12]

I can not actual see the part where fiat is protected by cryptocurrencies. In fact fiat keeps cryptocurrencies alive and valued until today. Due to investments and other projects Bitcoins and othe coins aree being valued.
In my opinion, fiat is fiat and it can not be harmed because there will never be a time that traditional money will disappear. Cryptocurrencies are like credit cards, it is convenient way of payment and could probably more acknowledged in the future but as I said fiat will never be neglected.

[BitHodler]

in fact the US dollar has been printed massively and the only reason it's not going down dramatically compared to other currencies is because other currencies have been printed in an even more massive way.

The main reason the mass printing isn't severely effecting economies is that the US dollar is a base currency, just like what Bitcoin is in the crypto market. That significance is giving the US dollar a great deal of value.

It's enough to somewhat undo the damage of mass printing, and that's all because of how governments around the world consider the US dollar to be worthy of being a base currency.

Basically everything in the world is tied to that currency. If the US dollar didn't had that global backing, things would be completely different and the US economy would likely have imploded already. We gave the US dollar that value.

[kimochidesh]

I think your links and the entire process you mention is quite complex and cause and effect relationships are highly indirect. To me all of this appears quite forceful. One thing is very clear that crypto transactions are limiting or reducing the number of fiat transactions. But the crypt market has no intention of going against or replacing fiat because government will never let that happen.

[osh5]

Bitcoin has a good chance to protect its users from fiat currency inflation but one should not hedge against inflation with bitcoin and hope to become rich in the overnight process. It's plausible that Bitcoin price would appreciate over time but it will take many years to happen. Right now buying Bitcoins as a hedge against inflation could be risky but that risk isn't greater than risk of buying any other asset or making investments.

[Sengoko]

I think bitcoin and Fiat are not antagonistic. From bitcoin development, maybe bitcoin has a protective effect on Fiat. We all know that Fiat often inflation, and bitcoin can control this very well. The continuous development of the encrypted community will promote the Fiat system to be healthier.

Bitcoin is no doubt one of the best thing and that there are so many people whose lives have been significantly changed because of bitcoin and that there are continuously investing their money into these crypto coins and are changing their lives. After this evolution of the crypto currencies, there will be no such need of the paper money and that people will avoid using it in near future.

[spongegar]

The biggest threat to fiat money is inflation. Inflation can be cured by injecting wealth into the economy and by that rising enough belief to keep the system afloat. This can be done for instance by occupying foreign countries and by that opening up new markets to the companies that are essential to the economy. Or this can be done by loose regulations with the derivatives markets, that will create wealth out of thin air and high hopes.

Can it be that pumping of the crypto markets is just another financial shenanigan created to keep the old system afloat?
They are creating new wealth out of nothing with cryptos, just like with derivatives. The made up wealth that is created, is actually backing the value of fiat. This would make sense why regulators seem so blind on goxdollars and tether.

this is actually a good notion. if you think about it, to buy coins you still need fiats and you actually convert crypto currencies to fiat so there is a direct correlation to the two. but then again, our goal is to have crypto currency used around the globe in exchange for goods and services. cutting off the middleman (fiat) with projects and business that accept crypto currencies will be the downfall of fiat in the future.