For Michael Saylor, bitcoin does not need to replace fiat currency to reach several hundred trillion dollars.
Bitcoin and Fiat – Peaceful Coexistence
As usual, Mr. Saylor re-explained why bitcoin is the best asset of all time. The most interesting passage, however, was his criticism of Austrian economics enthusiasts who believe that bitcoin must replace fiat currency to succeed. As is his explanation why chaos benefits BTC.
We highly recommend Anglophiles to watch this interview from start to finish:
The review in question:
“People often equate bitcoin with money because of the term ‘cryptocurrency’. It is more constructive to use the metaphor ‘digital property’ [Digital Property] to describe it, and not ‘digital currency’.
Use currency [fiat] as a medium of exchange offers the advantage of not having to pay capital gains tax. Fiat currency is a tax-free medium of exchange. It is possible to trade 100 times a day without worry since the Chinese, Japanese, Russian and European accounting systems are backed by the yuan, the yen, the ruble and the euro. These exchanges do not trigger a taxable event, so companies will always denominate their products in fiat currency. As long as there are governments, exchanges will not take place in bitcoin, unless you are located in a country where the currency has collapsed. This is the case in certain African countries or in war zones. But wherever governments work, fiat money works.
Believing that bitcoin will replace fiat currency is a distraction that causes mental impasses for many people. Some people say, for example, “Hmm, bitcoin is supposed to replace fiat currency. It must therefore succeed in order to maintain its value. But at the same time, it is too volatile, it is not part of the accounting system, it is taxable on each transaction, so it will not replace fiat currency and therefore I will not buy it.”
Thinking that bitcoin should replace fiat currency is like throwing yourself into a bottomless pit with a straitjacket. The right way to approach Bitcoin is to assume that it will replace all assets that are derivatives of fiat currency. That is, all assets with inferior properties. I will always use the dollar to pay my employees, but I will not place my cash in the American public debt, nor the debt of other multinationals. I’m replacing it all with bitcoin.
Do I want to estate my money for 30 years to receive a 3% or 4% return per year? Or do I want to hold bitcoin that appreciates at 40% per year? When you think about it, bitcoin does not replace the yuan, the euro or the dollar. It replaces debt securities that pay returns in euros, yuan or dollars.
Bitcoin also replaces stock market shares. The reason being that inflation is 7% per year [taux de croissance annuelle moyen de la quantité de dollars en circulation]. Companies must therefore pay a dividend of more than 7% to beat inflation. This is not the case. If you do the math, the value of cash generated by multinationals is falling exponentially.
If a company is a monopoly that manages to generate a return of 20% per year and inflation is 7% per year, then maybe I will buy its shares. But how many companies are capable of this? None, apart from the top 7 (Microsoft, Apple, Google, Amazon, NVIDIA, etc.). It is easier for a company to change countries than to modify its systems to do without Microsoft products. This type of company is more powerful than most governments and can boast high margins. The other 7,000 listed companies do not generate returns due to inflation.
Regarding real estate. Rents are capped by the inflation rate. If official inflation is 2%, but real inflation is 7%, you lose. It is also very difficult to increase tenants’ rent each year.
All of this is to say that the rate of monetary inflation benefits those who own scarce assets like bitcoin while deteriorating returns on other assets. So bitcoin does not need to replace fiat currency to succeed. […] Global wealth is approximately $850 trillion in real estate, debt, securities, art and other collectibles. Bitcoin is a better asset than all of that.
What’s going to happen is people are going to stop buying real estate for 25 or 30 times the value of the annual rent. They will sell everything until prices return to 10 times the annual rent. The same goes for company stocks worth 25 times their annual profits. They will buy bitcoin until the ratio falls to 12.”
When asked how much bitcoin will appreciate, Michael Saylor did not disappoint:
“In the long term, the money supply will increase by 7% per year. The S&P index will likely follow changes in the money supply. Within 100 years, bitcoin will continue to appreciate more than 7% per year because it is not as risky as a company. But in the short term, we are in a period of strong growth of 20-40% per year with volatility until we move to a more mature state. Then just look at total global wealth. If it’s $900 trillion, there’s no reason why bitcoin shouldn’t make up 10-20% of that. Which brings us to a figure of $10 million per bitcoin. »
Yours truly fully agrees with this analysis. Bitcoin doesn’t need to replace fiat currency to be worth millions. It is not even certain that this is desirable. The tool of debt is necessary to build a complex society (highways, dams, nuclear power plants, nuclear fusion, deep water oil drilling, aerospace, etc.).
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