The daily Bitcoin transactions volume hit an all-time high on Sunday, surpassing its previous record during the 2017 bull run. Meanwhile, the US government worked with two major banks to engineer the latest financial rescue plan. Although it appears that the two events are not directly related, the timing, on the other hand, might suggest something about the future of the cryptocurrency industry and Bitcoin’s place in an increasingly unreliable economy.
The JPMorgan and First Republic Affair
JPMorgan Chase just acquired First Republic after the bank’s assets were seized by regulators, becoming the second-largest bank failure in US history. First Republic’s collapse is partially attributed to rising interest rates and the Federal Reserve’s hawkish monetary policy that also brought down other banks early this year. While some may blame the bank’s management, economists believe that the US government’s bailout policy is to blame.
US Government’s Bailout Policy and Populism
Silently playing in the background of this series of events is the US government’s bailout policy that seemingly protects certain classes from the repercussions of their blunders. As many people see it, the government socializes losses while privatizing profits.
Such a move aligns with Bitcoin’s goal of challenging the authority of central banks and established powers. Bitcoin’s emergence as an alternative monetary system is attractive to some because it follows prewritten rules set by social consensus, unlike the political and monied interests that rule the US dollar.
Bitcoin’s Potential to Serve as a Legitimate Global Reserve Currency
Over the years, financial experts have witnessed the potential of Bitcoin to serve as a legitimate global reserve currency like the US dollar. Its fixed monetary issuance schedule and decentralization make it a viable alternative to the traditional banking system.
Bitcoin stands out on its own because of its inherent traits of decentralization, immutability, and scarcity. Basically, these are also the characteristics of gold that make it a good alternative to wealth preservation. However, this does not mean that this digital asset can always be relied on as a hedge against financial calamity or that people are choosing trustless financial systems over increasingly untrustworthy banks.
Latest Milestone and Ordinals Driving Up Bitcoin Transactions
Giving credit where credit is due, it should be noted that the financial system fiasco is not the sole driving factor influencing the trading volume of Bitcoin. One of the key events that are attracting people back to the world’s oldest circulating crypto is the introduction of Ordinal projects.
This new feature unlocked after the Taproot upgrade of Bitcoin, allowed the network to support non-fungible tokens (NFTs). More than 2.39 million Ordinals have been inscribed to date, accounting for roughly half of the transactions on the network. This feature also rewards Bitcoin miners with increased transaction fees, potentially helping to secure Bitcoin’s long-term security budget. While some Bitcoin enthusiasts see NFTs as a worthwhile feature, not all bitcoiners are aligned with this idea.
The recent surge in daily Bitcoin transactions and the US financial calamity may not be directly related. Still, it is evident that the US government’s bailout policy and the increasingly unreliable economy are causing people to seek alternatives to the traditional banking system. The crypto’s decentralized nature and fixed monetary issuance schedule make it an attractive alternative to established powers, including central banks. Furthermore, the recent introduction of Ordinal projects and NFTs have helped to attract more people to it.
It is crucial to remember though that Bitcoin’s inherent traits of decentralization, immutability, and scarcity do not guarantee its reliability as a hedge against financial calamity. Despite this, Bitcoin’s potential to serve as a legitimate global reserve currency remains strong.
Overall, it is clear that the future of Bitcoin and the traditional financial system is still uncertain, and only time will tell what the outcome will be.
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Giancarlo is an economist by profession with a career spanning nearly two decades. His professional journey has seen him assume vital roles in various government and private organizations such as the Department of the Interior and Local Government (DILG), the National Economic and Development Authority (NEDA), Megaworld Corporation, and the China Banking Corporation in the Republic of the Philippines.
In addition to his civic and corporate pursuits, his forward-thinking approach has led him to manage several prominent websites in the banking and finance sector, notably the Australia-based RateChoice, where he immersed himself in the world of emerging financial technologies and where he found particular interest in Bitcoin all the way back to 2013.
Prior to his addition to Blockzeit’s dynamic team, he held an essential role as Project Manager for initiatives encompassing blockchain, stablecoin, mining, special economic zone development, and iGaming. This noteworthy chapter in his career unfolded under the auspices of InPlan Consultancy Services, Inc., the think-tank of IMPERO Consortium Management Corporation headquartered in Manila, Philippines, and Tokyo, Japan. InPlan, led by a distinguished retired Cabinet member of the Philippines, collaborates directly with IMPERO’s core management team, contributing to strategic planning and business development endeavors.