The Bull Fiat Currency Case for Bitcoin

The bullish argument goes as follows: governments are increasing their borrowings to unprecedented and unsustainable levels. The debt burden will eventually cause governments to collapse, even the United States, and even under President Trump! When that happens, there is no more “full faith and credit” of the government to back the respective currencies.

The Bear Fiat Currency Bitcoin Case

While it is certainly possible that these insane levels of debt may eventually crater individual sovereign nations, along with their currencies, bitcoin and other cryptocurrencies will be of no value in those circumstances. That’s because, at the moment that the local currency is considered worthless, no bitcoin seller will sell his bitcoin in exchange for a worthless currency. Bears will now shout, “Venezuelans are selling their increasingly worthless Bolívars for bitcoin, and have been for some time.” That’s because the Bolivar is still a viable currency, despite the ongoing hyperinflation. A bitcoin seller can still transfer the currency into another form of currency. The market is still liquid for Bolivars, although not for much longer. Worse, holding bitcoin in a country that is no longer in civil control will not be of any value to the buyer/owner. If a fiat currency totally collapses, the resulting civil unrest may very well take out the power grid. Those people who have cryptocurrencies may not even be able to access them.

The Final Irony of Bitcoin Value

There’s also the question of how one actually measures the value of a bitcoin. In an ironic scenario worthy of O. Henry, how is the value of bitcoin expressed around the world? In terms of the local fiat currency! For as much as they grow about the replacement of fiat currency, pickling bulls value their cryptocurrencies in terms of that very same fiat currency.