Bitcoin could be a panacea for income inequality, says Forbes

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Bitcoin (BTC) has the potential to solve the problem of world income inequality, as it can behave as a commodity and an asset at the same time, and have its price defined by market demand, according to an analysis by the Forbes.

Today, investing in hard assets is the most preferred method of providing an inflation hedge as they are the only asset types that increase at a similar rate to inflation. While it looks like it might solve the inflation hedging problem, it splits the income gap even further.

The article states:

“The significant rise in the price of tangible assets reveals a broader issue with global economies. In other words, polarization in the economy. This refers to the inequality problem where the 1% owns most of the tangible assets that the 99% must continue to pay.”

The pandemic has played a significant role in polarizing the hard asset market. Initiations such as mortgage campaigns backed by bonds issued by financial institutions created a cash flow. However, due to the conditions of the pandemic, financial institutions were unable to apply these resources. That’s why they relied on hard assets, which polarized the market.

Even if the effects of the pandemic wear off, the polarization is far from cured. Current events such as the Russian-Ukrainian conflict continue to drive up prices for food, gasoline and shipping around the world. The result is a continuing rise in inflation and a deepening polarization of the tangible asset market.

How can Bitcoin solve this?

The article argues that the world economy will not heal itself. He claims:

“If the situation worsens, governments will be forced to print more money in the form of Universal Basic Income (UBI). This new money can be distributed using a bottom-up logic to ensure that the average family can afford basics such as food, housing and healthcare. The rich 1% will get richer, while the poor 99% will get poorer.”

Pricing and coverage

Bitcoin is a commodity and an asset at the same time. Also, its price is determined by market demand. Bitcoin supply will decrease by 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 increase will exceed inflation rates. Therefore, Bitcoin works best when it comes to storing value and providing an inflation hedge at the same time.

Property

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

This provides exceptional benefits in political or economic challenges. Cryptocurrencies come to the rescue in case of war, as in Russia, or exceptionally high inflation rates, as in Turkey.

Will Bitcoin Rescue the World Economy?

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

Despite arguments suggesting that Bitcoin is delinking from the traditional market, the article says 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 starts behaving individually. When that happens, it will also turn into a proper store of value, which will give Bitcoin the power to save the world economy.

Posted in: Bitcoin, Analysis

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