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It is a well-trodden argument, Bitcoin Designed for developing countries. a more accessible financial system; a medium through which citizens can avoid failing currencies;
In theory, it makes sense. I have written extensively on this in the past. As dangerous and experimental as bitcoin is, this mysterious digital currency may one day offer such economically oppressed people a way to protect their wealth. I can state the case.
but that day not now. In fact, Bitcoin is completely useless for such purposes. That’s despite the chart below showing Bitcoin’s appreciation against the Argentine peso last year.
Some Bitcoin advocates have declared that this is a poignant demonstration of Bitcoin’s power. But it’s important to note what we’re benchmarking here. The Argentine Peso has literally been one of the world’s worst performing currencies in recent years. Plotting that value against the US dollar shows how much it has fallen.
This Argentine peso analysis actually has nothing to do with Bitcoin. It simply highlights how the peso was a terrifying storehouse of wealth, and how devastating the devaluation of the peso was to citizens.
But imagine holding your wealth in Bitcoin. What if this year he’s trying to send his kids off to college in January. The tuition fee is, for example, $100,000. Suppose she had $10,000 in Bitcoin in November 2021 (when it was trading at $68,000). If her January 1st of this year were due for tuition, $10,000 would have been reduced to her $2,400. Need I say more?
Instead of benchmarking Bitcoin as one of the worst stores of value, we should compare it to the actual store of value. If Bitcoin replaces money, it’s not really a win if it’s better than one of the worst currencies. This is the ultimate strawman theory.
Bitcoin should be charted relative to established currencies. In the chart below, we have plotted the weekly percentage movements of the EUR and Bitcoin (both compared to the US dollar). It’s like comparing day and night.
The example of Argentina is an interesting example when considering another kind of cryptocurrency, stablecoins. In theory, this would open up access to the dollar for people who would otherwise have been shut out (by capital controls, banking barriers, etc.). At the same time, the dollar, the asset that is purchased, is a storehouse of wealth worth putting into college savings.
Will this ever change? Indeed, no one knows what will happen in 50 years. But I’m talking here now. Argentinians moving from Pesos to Bitcoin are like jumping out of one fire and into the next. For everyday Argentine citizens who fear their wealth, are there arguments in favor of Bitcoin over stablecoins?
So it’s one thing to discuss stablecoins. And yeah, I can see it as the currency is devalued into oblivion, the citizens of the high-inflation regime are being crushed.
But Bitcoin? How can I look at these currencies and decide that Bitcoin is the solution? We believe that kimono is a story of a store of value.
But now, in 2023? Bitcoin is not Argentina’s answer. Far from it.
