Economics is a complex subject due to its flexibility in defining things.
It isn’t economic definitions are universally agreed upon and not ambiguous. The definitions and interpretations are from a standpoint that is traditionally agreed upon.
While I agree with some of your details, the last paragraph is a bit complex. Dollar loses its
buying power over time, and 1btc has been the opposite over the years. You're right that Bitcoin could lose 50% of its current price rate, but do you think that 1btc may not be able to purchase a product of $10 in the future?
Perhaps, but that would be disastrous for us and for the economy if it happens within a short amount of time. The possibility is non-zero however, if you solely the trend to dictate the price movement, then probably not. The valuation doesn’t depend solely on the trend however, there is a myriad of factors affecting it.
Bitcoin has a limited supply, making its value strong. Over the period, the dollar supply has been without limits to buy weapons for war or take care of COVID-19, which dropped its purchasing power. Do you think purchasing power and value have nothing in common?
The incorrect assumption is to associate limited supply with the market value. That doesn’t actually matter because it is already priced in and that essentially it is still undergoing an inflation year on year until the rewards becomes negligible.
What is particularly important is actually the demand as well. If policies are favouring Bitcoin and/or if they have an optimistic outlook, then the price would rise owing to the higher demand and limited supply. If Bitcoin loses its appeal, then the reverse happens.
Now, I’ve linked the purchasing power and value together; because the value (ie. how valuable it is) is dictated by the purchasing power. Your post incorrectly disregarded that. In the real world economy, inflation is actually good. It is a form of economic measure which promotes growth and that is precisely why the economy has been growing. Conversely, deflationary economy are not desirable and are worse off.
One more minor point probably has to do with how much people are making and their purchasing power accordingly. When prices increases, wages often increases as well. When money is being used on COVID, buy weapons for war, then certain industry actually benefits from it. These sorts of economic policies trickles down and benefits most. Of course, I’m not condoning wars or pandemics, but you get the idea.
You should probably look at the different fiscal policies to make sense of what’s going on. The arguments:
Government prints money and increase debt is bad!
Government rises inflation rates again and they’re stealing from us!
Is often flawed and without consideration of the entire fiscal policy in general.
Lastly, between compound interest and bitcoin, which would you go for?
Well, that depends on my risk appetite. Currently my exposure to Bitcoin isn’t particularly high, think 20 to 30% and the remainder is in stocks and bonds. For all the reasons that I have explained previously, I believe that it is clear why.
