The Bitcoin Movement Explained: Are You In Or Missing Out?
Bitcoin’s relevance is often discussed regarding countries like Turkey, where inflation and the depreciation of the local currency have impacted purchasing power and financial stability. Turkey serves as an example of what not to do when it comes to preserving value and economic strength. All fiat currencies eventually lose strength against Bitcoin. However, the Turkish Lira loses value against most fiat currencies.
Anyone who is not, in some way, involved in crypto at this point is missing the opportunity of a lifetime. It has become blatantly obvious how crypto can solve many of the current issues in our world. Every fiat currency is losing value at an accelerated rate, beyond what was forecast, even though forecasts already factored in higher inflation.
The Turkish Lira, for instance, recently lost 50% against the dollar in a very short period. Bitcoin was hitting new all-time highs in Turkey, as Turkish citizens rushed to preserve their capital by acquiring Bitcoin. The asset is being widely utilized as a store of value. This is expected to strengthen as a trend, especially in countries such as Turkey and Argentina.
Avoiding Financial Disaster: Bitcoin, Inflation & Risk Management Explained
There is a lesson to be learned from the Turks. The Lira has been under strain for some time; this is nothing new. Had they instead prepared for what was clearly on the way, they could have hedged themselves to some extent. However, the majority only woke up too late. This is usually the case for the broader majority.
There were obviously those who began moving cash reserves into Bitcoin, ultimately finding shelter before the 50% crash against the dollar. They then went on to experience further gains as the majority made a late rush on Bitcoin, subsequently pushing it to new all-time highs. This dynamic is not isolated to Turkey. Countries such as Venezuela and Argentina have experienced similar scenarios.
What Does “Fiat Currency Weakness” Mean?
Waiting for your expectations first to come to pass before acting on them is definitely not the wisest move. What many fail to realize is that even though the dollar is losing value at an accelerated pace, other fiat currencies are still collapsing into the dollar. If the dollar is losing ground and your particular national currency is weakening against the dollar, how weak is your currency?
The saying often cited by Bitcoiners is that all fiat will go to zero. This is actually the structural destination of any fiat currency and yet sounds like a particular group, in this case, Bitcoiners, getting ahead of themselves. However, it’s not an exaggeration. The dollar is in steady decline in both its purchasing power and inherent value.
The Collapse Of The Dollar’s Purchasing Power: What It Means For Your Money
So, where are we now regarding the dollar? Since its inception, the dollar has lost approximately 96% of its purchasing power, never once showing volatility towards the upside. Simply one long, massive dump extended over decades. Comparing the graph of an abandoned altcoin with no use case would reveal several similarities. There is no future wrapped up in any fiat currency.
The reason it goes largely unnoticed is that it is generally spent within days of earning it by global consumers who are already short of it. Furthermore, it is a “slow leak”, similar to what you may have experienced on your vehicle. It is difficult for consumers to realize what is actually occurring over the longer term. However, in certain jurisdictions, it is much more evident, especially for low-income earners.
You can drive around all day, and everything is just fine. However, a few days later, you encounter a completely flat tire in the morning. Similarly, you can save for years and years only to find that what you have saved can no longer purchase anything of significant value. This is the “fiat effect”, even in countries where the currency is considered to be fairly strong.
Bitcoin As An Inflation Hedge: Does It Really Protect Your Wealth?
This is why even the most conservative investor should have some exposure to Bitcoin. The likelihood that that small allocation will grow significantly over the next five to ten years is very high. BTC is, in essence, a long-term investment, which basically means that short-term volatility is merely noise. In my opinion, if, after 5 years, Bitcoin hasn’t produced gains, by all means, scrap it from your portfolio.
However, this has never happened before and, in my opinion, is unlikely ever to happen. Short-term, there is volatility. However, over a 4- to 5-year period, gains are highly likely, especially since all fiat currencies are being devalued. This is what investors should pay attention to: factoring in the effects of inflation regarding investment returns.
Final Thoughts
Even though the Turkish population did, in essence, execute what many would consider the best option, it was too late. Doing the right thing at the wrong time is almost the same as doing the wrong thing! For the simple reason that it is no longer beneficial. The wise learn from others’ mistakes, thereby protecting themselves from the consequences of terrible decisions.
This is done by simultaneously extracting the wisdom that another paid the price to reveal. Let’s all take note of what happened in Turkey and many other parts of the world. Whatever we can learn is most definitely to our advantage, provided we act on it. Will you? Over the long term, Bitcoin acts as a hedge and store of value, especially for countries like Turkey! Thanks for stopping by, and see you in the next one!
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