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Bitcoin could be a panacea for income inequality, says Forbes

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Bitcoin (BTC) can solve the world’s income inequality problem because it can behave like a commodity and an asset at the same time, and its price is determined by market demand, according to analysis from Forbes.

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Today, investing in hard assets is the most preferred inflation hedge method as these are the only types of assets that grow at a rate similar to inflation. While this seems like it could solve the inflation hedging problem, it further widens the income gap.

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The article says:

“A significant rise in hard asset prices reveals a broader problem with the global economy. That is polarization in the economy. It refers to the issue of inequality, where the 1% owns most of the tangible assets that the 99% must continue to pay for.”

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The pandemic has played a significant role in polarizing the hard asset market. Initiatives such as secured mortgage campaigns issued by financial institutions have generated cash flow. However, due to the conditions of the pandemic, financial institutions were unable to invest these funds. That’s why they relied on hard assets, which polarized the market.

Even as the effects of the pandemic fade, polarization is far from healing. Current events such as the Russian-Ukrainian conflict continue to push up the prices of food, gasoline and shipping around the world. As a result, inflation is constantly rising and the hard asset market is becoming more polarized.

How can Bitcoin solve this problem?

The article argues that the global economy will not recover on its own. It is stated here:

“If the situation worsens, governments will be forced to print more cash in the form of a universal basic income (UBI). This new money could be distributed bottom-up to make sure the average family can afford basic things like food, housing and health care. The rich 1% will get richer, and the poor 99% will get even poorer.”

Pricing and hedging

Bitcoin is a commodity and an asset at the same time. At the same time, its price is determined by market demand. The supply of Bitcoin will decrease due to its code, and as companies continue to invest in it, demand and price will only increase in the future. It is very likely that this growth will exceed the rate of inflation. Thus, Bitcoin works best when it comes to storing value and hedge against inflation at the same time.

Ownership

Another benefit of Bitcoin is that it gives full ownership to the holder. In other words, they cannot be confiscated or manipulated like hard assets like real estate, energy or land.

This provides exceptional advantages in political or economic tasks. Cryptocurrencies come to the rescue in case of war, as in Russia, or unusually high inflation, as in Turkey.

Will Bitcoin save the global economy?

While it is absolutely clear that the solution is in Bitcoin, the article also notes that it is not fully ready for action.

Despite arguments suggesting that Bitcoin is decoupling from the traditional market, the article states that it is still highly correlated with traditional market movements.

Bitcoin will remain a transactional currency until it properly separates from the traditional market and begins to behave individually. When that happens, it will also turn into a proper store of value that will give Bitcoin the opportunity to save the global economy.





Credit : cryptoslate.com

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