Bitcoin is “gold on steroids” so, when the right tools are found, central banks will be able to use it to protect themselves from inflation.
Surely, you have heard about the many advantages of Bitcoin. The main cryptocurrency has positioned itself in an important place in the world of finance, becoming a feasible option, capable of even competing with gold.
With the continued growth of inflation over the last few years, banks have begun hoarding gold, a common move, with which they seek protect your assets. The reason why central banks buy this precious metal is very simple: throughout history, it has been the most stable asset.
Why do central banks buy gold?
In the long term, the price of gold always rises, which is why it is usually the favorite hedge of banks, which prefer solid assets with little risk. Furthermore, central banks always prefer to have gold in reserve, to have assets in case of problems.
It is for this reason that, traditionally, the threat of inflation has been like gasoline for gold, which skyrockets in these periods. However, recently, gold has had a great competitor: Bitcoin.
One of the common questions we have asked ourselves from the beginning is, if Bitcoin may replace gold as a guarantee of protection in the future. To answer it, we have spoken with Adolfo Contreras, expert in business management and development, professor interested in monetary theory, cybersecurity, software and Bitcoin, who has told us very interesting things about the first cryptocurrency and how it works.
Bitcoin: the best and only the best of gold
One of the things that Contreras points out is that Bitcoin has a lot in common with gold, since Satoshi Nakamoto, when creating the cryptocurrency, looked at all the characteristics that gold has, and then limited himself to improve them all; both the good and the bad. This has caused many experts, such as Streve Wozniack, one of the creators of Apple, to point out that Bitcoin is mathematically pure gold.
Over time, central banks around the world could adopt Bitcoin as a form of protection against inflation and other problems, such as rising interest rates. However, there is currently a major barrier to adoption: the great volatility of cryptocurrency.
Volatility: the main problem for Bitcoin to surpass gold
In this sense, the expert Adolfo Contreras explains to us in the video that the first step would be to eliminate this access barrier, since the central banks They do not want to have excessively volatile assets on their balance sheets. Therefore, it would be necessary to create some type of mechanism, using financial derivatives or some type of coverage that allows them to maintain the price with relative stability.
To keep the risk to a minimum, all the derivatives on which they are based must also keep the risk and volatility to a minimum, which for now is one of the main problems, since the different legislations in each region make it complicated find these types of products right now.
What does this mean? Well, it is very possible that, over time, central banks will end up finding the necessary elements to use Bitcoin as a substitute for gold, since according to Adolfo Contreras, Bitcoin is basically “gold on steroids”.
