How does the US debase the Dollar - Getting rid of the gold standard was the big kickstart to monetary debasement. However, the US has other means to achieve this. Two primary ones that get a lot of attention these days are money printing and interest rates. Money printing being the obvious one. During covid, a lot of stimulus was injected into the US market. This had two effects. It made the value of existing dollars less since there were now more of those exact same dollars in circulation, and it increased the prices of assets through inflation. Inflation happened because people wanted to spend their money instead of hold it and watch it lose value. This increase in spending leads to an increase in demand for assets. Since the assets could not be reproduced with the ease that dollars could, you had a large amount of money chasing a much smaller amount of goods. So prices got bid up or inflated, and things became more unaffordable for subsequent buyers. The other way the dollar gets debased is through low interest rates. Low interest rates spur borrowing and credit creation. Borrowing again allows people to have more money to chase that scarce good which over time increases the price of goods and leads to inflation. It’s worth noting that governments favor these methods because the main alternative is to raise taxes. Raising taxes is an implicit cost that individuals feel every time they spend or get paid. So this implicit taxation through monetary debasement is preferred. But over time, the effects are just as harmful.
Why can't bitcoin be debased - So what makes bitcoin different from dollars? First, bitcoin cannot be inflated. The supply schedule is hard coded, culminating in a terminal supply of 21,000,000 in 2140. Until then, a set amount, currently 3.125, is released approximately every 10 minutes. This amount is cut in half every four years until we reach the 21,000,000 bitcoin threshold. Second, bitcoin is decentralized. Changes to the bitcoin code require the vast majority of the network to be in agreement. Contrast that to fiscal and monetary policy changes in the US, where a small minority make the rules for millions. Bitcoin is democratic, sound money.
In May, the state of Wisconsin Pension Fund announced it, too, owned Bitcoin ETFs to the tune of $163 million.
The State of Michigan Retirement System said it now owned $6.6 million in Bitcoin via ETFs.
It appears that times are changing. As more institutional players see bitcoin as a way to help their portfolio of assets meet a level of growth, it is sure to attract copycats and followers from those who have not adopted the strategy. This increase in demand could have an immensely positive impact on the future price of bitcoin.
