Bitcoin

Bitcoin is not a “safe haven”. Why?

In the investment world, the term “safe haven” typically means low returns. The good side is of course the stability. In other words, no money is lost. But the conservative stance has its price. There isn’t much profit. The investment is safe, but the returns are modest. Here are some key concepts: Risk, volatility and appreciation. What kind of investment is Bitcoin?

In a normal world, a big win means a big risk. The dollar, for example, is a safe haven in many ways because of its stability. Despite the many arguments of its critics, the dollar is an extremely stable currency. Much is said about the future collapse. But I am referring to the facts. It is not for nothing that it is the world’s reserve currency and the most popular instrument of global traders. Ah, but it loses a few cents every now and then against other coins. Of course, this supposed stability is completely relative. Stability does not mean the lack of cycles.

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Bitcoin is not a “safe haven”. Why?
Bitcoin is not a “safe haven”. Why?

Now let’s talk about inflation. Critics of the dollar don’t hesitate to remind us that 30 or 70 years ago more things could be bought with the same money than they are today. Apparently 2% annual inflation is too much. That could be true. But this story is incomplete. Because if we are to make a before-and-after comparison, it would be misleading to speak exclusively of dollar inflation out of context. What happened to the stock markets over the same period? What happened to the gross domestic product? What happened to per capita income?

What is the problem then? What really happens is that there are two types of economic thinker. There is a group that defends saving in currency. And there is another group that advocates investing in assets. The first group is usually associated with the more conservative stream. A stream of minorities that can often be found in right-wing political circles. The second group represents the majority of people. Here we need to include those who are responsible for the monetary and fiscal policies of the world’s major economies. While the first group shows the graph of inflation for the past 100 years with alarm, the second group proudly shows the graph of the stock markets over the same period.

A country’s economic growth is not generated by the accumulation of currencies by its citizens. Saving, a hard currency, and negative inflation are not the best recipe for an economy. At least that’s how people think today. What is being promoted now is expenditure, employment, production, credit and investment. Like it or not, these are the ways of the world today. When we talk about prices in the past, we must also talk about the economy of that time. What was the gross domestic product? What was the unemployment rate? What was the per capita income?

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