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RE: Bitcoin A Crazy Target for BTC Or The First Major Global Bubble?

in #bitcoin7 years ago (edited)

When you use FIAT to buy cryptocurrencies, you don't burn the FIAT.
It's possible that the same FIAT is used to buy bitcoins over and over again.
Imagine this scenario:
In our small city there's only 3 places:
A farm, a market and a Crypto Exchange.
I farm food, sell it to the market and buy BTC with the money.
The workers of the exchange need to buy food in the market.
Can you understand the loop here?
Now imagine this in a much higher scale.
Even if there's only $1 Quadrillion dollars in the world,
crypto market cap could reach much more.

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Indeed, you do raise a very valid point, you're right. The fiat doesn't simply disappear, so in that sense the fiat supply would remain the same, and with the same relative value.

When you say that the same fiat may be being used to buy bitcoins over again is also very valid point and a massive redflag. This is the sort of stuff that makes me uneasy. This process you've described is what's called money velocity. A high rate of money velocity is a major driver/early-symptom for periods of high inflation and even hyperinflation. Mike Maloney, a well known gold-bug, made this case a few months back that we were yet to see velocity picking up before inflation can really pick up and in turn make the gold price rise.

It's incredible to see that a connection between all the assets is forming. The issue is, in the face of such a massive disruption, what sort of chaos will we actually be subjected to?