Bitcoin could be a panacea for income inequality, says Forbes Zeynep Geylan · 4 hours ago · 2 min read
Bitcoin emerges as a way to rescue the world’s economy as the inflation continue to increase and the income gap widens.
Cover art/illustration via CryptoSlate
Bitcoin (BTC) has the potential to solve the world’s income inequality problem as it can behave as a commodity and an asset at the same time, and have its price set by market demand, according to an analysis from Forbes.
Today, investing in hard assets is the most preferred method for providing an inflation hedge, as they are the only types of assets that increase at a similar rate to inflation. While it seems like it may solve the inflation hedge problem, it further divides the income gap.
The article states:
“The significant increase in the price of hard assets reveals a broader issue with global economies. That is, polarization in the economy. This refers to the problem of inequality in which the 1% possess the majority of the hard assets that the 99% must continue to pay for.”
The pandemic has played a significant role in the polarization of the hard assets market. Initiations like security-backed mortgage campaigns issued by financial institutions created a cash flow. However, due to pandemic conditions, the financial institutions were unable to invest these funds. That’s why they relied on hard assets, which polarized the market.
Even as the effects of the pandemic fade, the polarization is far from healing. Current events like the Russian-Ukrainian conflict continue to increase food, petrol, and shipping prices worldwide. The result is continuously increasing inflation and deepening polarization of the hard assets market.
How can Bitcoin solve this?
The article argues that the world economy is not going to heal on its own. It states:
“If the situation gets worse, governments will be forced to print more cash in the form of a universal basic income (UBI). This new money may be distributed using a bottom-up rationale to make sure the average household can afford the basics such as food, housing, and healthcare. The rich 1% will get richer, while the poor 99% will get poorer.”
Pricing and hedging
Bitcoin is a commodity and an asset at the same time. Moreover, its price is determined by the market demand. The supply of Bitcoin will diminish by its code, and as companies keep investing in it, the demand and the price will only increase in the future. It is very likely that this increase will exceed the inflation rates. Therefore, Bitcoin works the best when it comes to storing value and providing an inflation hedge at the same time.
Another advantage of Bitcoin is that it gives full ownership to the holder. In other words, it can’t be confiscated or manipulated like hard assets such as real estate, energy, or land.
Will Bitcoin rescue the world economy?
While being absolutely clear that the solution lies with Bitcoin, the article also notes that it’s not fully ready for action.
Despite arguments suggesting that Bitcoin is decoupling from the traditional market, the article says it is still highly correlated to the movements of the traditional market.
Bitcoin will remain a transactional currency until it properly decouples from the traditional market and starts behaving individually. When it does, it will turn into a proper store of value as well, which will give Bitcoin the power to save the world economy.