The current fiat financial system is faltering, and Bitcoin may be the solution we need. Balaji Srinivasan, a former CTO of Coinbase and General Partner at Andreessen Horowitz, recently bet $2m with James Medlock that Bitcoin would reach $1m per coin within 90 days. Srinivasan argues that the dollar’s impending deflation will lead to mass hyperinflation, driving up Bitcoin’s price.
The Bretton Woods financial system, which established a global system based on the US dollar, is creaking, with numerous Lehman Brothers moments manifesting over the past year alone. The dollar’s value now relies solely on trust since it is no longer linked to gold, and the petrodollar system is looking increasingly vulnerable. BRIC nations are calling for their own currencies for international trade, and currencies like the Yuan are being used for international transactions.
Bitcoin is needed in our current, broken financial system because it has a set supply and cannot see its value inflated away. Trust in third parties and reliance on debt is not a factor with Bitcoin. Rampant money printing and inflation remain out of control, with customers abandoning banks out of fear of collapse and as they seek higher yields. Large corporations like Apple are entering the savings market, offering ten times the US national average interest rate.
As we face continued war, ongoing pandemic recovery, global supply chain issues, rising inequality, and increasing protectionism, our existing financial system is failing. Balaji Srinivasan’s assertion that DeFi has a large role to play in forging a better future doesn’t look like some utopian ideology. Bitcoin holds the key to helping us unlock a more stable, prosperous financial future. It is a currency that cannot be manipulated, unlike fiat and traditional banks. Its fixed supply means it is the check balance and opt-out of the problems associated with money printing.
DeFi has its own problems, and further regulation and measures such as third-party confirmation of proof of reserves in major exchanges are needed. Bitcoin, however, is well established and trusted by hundreds of millions already. The emerging multipolar monetary order will require new financial market infrastructure that enables the co-existence of TradFi and DeFi. This means that further crypto regulation, large-scale investments, and government support are required. We must work with DeFi technology, not against it, if we are to secure a better financial future.
