Does Money being Physical Actually do anything?
By: Wise Rise
Tags: Bitcoin, Wise Token, Wise, Btc, Store Of Value

Many people seem to believe that cryptocurrency cannot have any value simply because it is a digital asset. Does this actually have any logic behind it?

The Gold Standard

Gold after all, once “backed” the US Dollar, and the US Dollar plunged as it was being decoupled from the Gold Standard, and is still falling every day till today. So it is very easy for someone to assume that Bitcoin, Wise Token or any other non-tangible form of money to be worth-less.

It is easy to associate dollars to wealth, even though the real wealth is in the goods and services that the dollars in your hand gets you. Hence, it is a store of value. The value that goods and services provide need to be “parked” into a unit of account, example, you buy a good that is worth “100 Dollars”. These are what functions stores of value provide.

Other stores of value, such as Bitcoin, Wise token, Gold, and $h*t coins too, they all are able to be units of account. What makes a store of value attractive for a holder are how the units of account are created.

Under the Gold Standard, the US Dollar was “backed by Gold”. This meant that US Dollars were not the actual store of value, they just represented Gold stored in people’s banks. A representation Gold, that stores value. The notes were initially introduced to allow for easier transactions. Later on, the US Dollar eventually decoupled with Gold. The banks notes were now the new store of value.

Following this the value of the US Dollar after decoupling with Gold began falling, and still is falling to this day.

When the US Dollar was decoupled, the Central Bank of America, the US Federal Reserve, began printing US Dollar notes. Remember that the dollars are only a unit of account, NOT the actual wealth itself. This is what causes the US Dollar to go through inflation. Inflation through currency printing is due to increasing number of units of account, while the actual amount of wealth stored remains the same.

Gold being physical Element 79 meant that no one could make more units of account as Element 79 cannot be manufactured. Gold is also scarce. Gold has a very high ratio of it being above the ground vs underneath the ground vs other metals. This means that mining Gold does not massively diluted Gold’s value as there is not that much readily mined. This creates a very small amount of inflation, allowing Gold to hold onto its value.

Gold does not rapidly make more representations of wealth, which would hurt its valuation. Gold is an element that is harder to dilute, which happens to have tangible properties.

If the US Dollar never faced any dilution at all, it would have never lost any of its value, and probably gain value over time as more wealth is created and represented by the same number of units of account, US Dollars.

Cryptocurrencies

Cryptocurrencies such as Bitcoin and Wise Token, while not tangible, are stores of value. If a $h*t coin prints 50% in a single day, it will store the same amount of wealth and just create more units of account hurting its value.

Any Cryptocurrency can store wealth. Most people grew up when everything Digital was worth-less because it could be copied, an infinite source of inflation, because you can easily create more units of account. This created an association that digital assets can’t be worth much as a physical asset. Unlike Chucky cheese tokens, something like Bitcoin cannot be made in a factory, or copy pasted to create more representations of wealth. Because of this, ignoring more wealth coming into and going out of Bitcoin, Bitcoin is actually superior to Gold because the units of account, Bitcoins, are known number, and have a fixed emission rate. Bitcoin is not some printable paper currency.

Volatility

If Bitcoin, Wise Token or any other Cryptocurrency got trillions in Market Cap for a long enough of time to build their liquidity, there is no way on earth that we would not be more stable that USD or Gold in valuation. If Gold drops 2%, that is more than Bitcoin dropping 100% in a single day in sheer valuation. Bitcoin is tiny compared to US Dollar or even Gold, has 100x leverage exchanges, lower liquidity, is open 24/7 for trade, and also has more fear and FOMO due to lots of investors not knowing Bitcoin basics, which leads us to our next point.

Cryptocurrency gets its value from belief

This statement makes it sound as if people mediate and build up the price. No. Straight up no. The price has to do with how many people transfer wealth in and out of Cryptocurrency, and how many units of accounts there are being created. When people believe, say, Bitcoin or Wise Token is about to “Moon”, they buy it. This moves the price up. And vice versa. The thought leads to action. A difference, otherwise then people could “meditate” the price up and down.

So when people believe that Bitcoin or Cryptocurrency is worth-less because it is not a tangible asset class, this pushes more people out of fear when Cryptocurrencies have down-ward price action. They start to be more susceptible to fear and doubt. And Cryptocurrencies already have other reasons to be so volatile, so its time to let go of this tangibility nonsense, especially when there is much more else to worry about.

Merry Christmas, I hope everyone here gets something out of this Christmas. 2020 was a rough year for most. Random acts of kindness go along ways.

BTC Address: bc1qnrhjd8r8xjt55mnmd0q82ajrjal7lsg239ary4

Wise Token & Ethereum Address: 0xE827bD29E2669a3cD11d727a34146991E2Fdc851

Wise Token Referral Link: https://wisetoken.net/?w=0xE827bD29E2669a3cD11d727a34146991E2Fdc851

I said 2020 was rough, so I get it if I don’t get any donations. Make sure to just be nice to people if the guilt trip is real. Merry Christmas.