Government Hates What People Love
This may not be true for everything, but it is undeniably true for cryptocurrencies. A major reason is tax. Governments do not get any tax from Bitcoins. Anonymity comes a close second. Every country has its own fiat currency whose value depends on the state’s export–import balance. If the exports perform well, then the currency value increases. The same logic applies to cryptocurrencies as well, but the performance of Bitcoins is global and not impacted by a single country’s trade conduct. If governments, by any chance, start embracing cryptocurrencies, they would be required to bring about major changes, including macroeconomic changes such as GDP, inflation rate, and government debts, in the financial and economic sectors.
How Do Bitcoins Fair Against Fiat Money
In comparison, Bitcoins:
- Give power to individuals to control their money
- Are not affected by inflation, thus moving quicker and harder to lose
- Are not centrally controlled and can rebuild free-market capitalists
- Do not face long-term economic stagnation or collapse
Consider the example of Venezuela. A series of bad political decisions and an oppressive regime, along with the one ill-fated economic policy that printed Venezuelan bolivars to repay the state’s debts, causing two decades of hyperinflation, have sent the country’s economy into a downward spiral. With the Venezuelan bolivar nearly unusable, Bitcoins have become the chief currency, and Venezuelans now use the cryptocurrency to buy medicines and other basic goods. In 2019, the Bitcoin trade saw an increase of 30% in Venezuela.
Well, this does not mean that other countries might suffer the same fate. It is just to say that bitcoins are a viable option when fiat money falls into a crisis, provided governments stop fearing the cryptocurrency and devise an improved mechanism to regulate it.
The Money Control Rationale of Governments
The money supply is extremely vital for a state’s economy. A country’s central bank decides how much fiat currency is to be printed, thereby acquires the authority to control the state economy. Too much of it could lead to hyperinflation and a shortage of it to deflation. Governments have a major stake in the performance of a country’s economy, and hence, the rationale to always be in control of money. This is exactly why countries avoid cryptocurrency because it does not dance to the tunes of the Government.
The Downside of Bitcoins
For all its advantages, Bitcoin has its pitfalls as well that include:
- Zero regulatory oversight when things dive south
- Offline BTC payments are possible but largely depend on Internet availability
- Transaction fees are expensive. For example, a journalist claimed on Twitter that he was charged $15 to transfer bitcoins worth $100 from his Coinbase wallet to a cold (hardware) wallet
- Transaction speed depends on network congestion and mining efficiency
- Conversion to fiat money is extremely costly
- Not all shops or service providers accept bitcoins
- BTC transactions are immutable; the moment it leaves the wallet, it is gone forever
- BTC buyer’s protection needs further upgradation
- The ideological core goes against every known powerful institution, such as governments, banks, censorship, and regulators, and thus faces resistance from these players.
The Road Ahead
Bitcoin’s long-term potential will take time to be established. It is a relatively young asset, hardly ten years old, that lacks the powerful participation of institutional capital, one reason why it fluctuates quite erratically. Owing to its anonymous and decentralized nature, governments are finding it difficult to allow for their legal usage. On the whole, the Bitcoin economy is still a legal gray area in most states. But, numbers of Bitcoin investors are increasing day by day, and making good money from it. If you also want to make money from it, then you must have a look at the Bitcoin Era, which is an innovative tool to make huge profits from Bitcoin. Get more news and updates along with real-time Bitcoin price, technical analysis, guidelines, and breaking news at our BTC latest news section.