Bitcoin Stability, Fiat Volatility: What Happens?

 

Jerome Powell, Chairman of the Federal Reserve, said that in the next two months there would be no reduction in the key rate, and that the decline would not occur until March-April. The Fed waits for inflation of 2%, after which it is possible to start cutting the rate.

The announcement immediately triggered a reaction in stock markets - investors expected a more aggressive action. Stock indices fell, but gradually returned to almost the same values. Bitcoin responded within the usual daily fluctuations.

At the same time, CoinBase shares fell by more than 9%.

This is the paradoxical situation: Bitcoin does not respond well to the news of the "traditional" economy, and one of the leading crypto exchanges falls in anticipation of a long period of high rates.

This situation clearly characterizes the economic situation. We see how "crypto" and "fiat" economies are clearly separated. Bitcoin, of course, "lives" in the crypto space, Coinbase shares "settled" in the fiat.

Modern fiat economy is built on the concept of credit. This leads to the formation of debt and the need to pay interest. At a time of low rates, companies could build up debt. As the rates rose, the cost of debt service rose, pushing many companies out of the comfort zone.

Cryptocurrency is subject to a different logic and therefore responds much weaker to the actions of the Fed. For it the actions and statements of another state body - US SEC are more important.

Now the US economy and, consequently, the world economy depend on the actions of an extremely narrow group of elites. 

This is the main vulnerability of the fiat system. It is subjective. A simple mistake at the decision-making level could cost trillions of dollars. 

The crypto is much more protected, it is not burdened with old debts. Decentralization completely eliminates subjectivity, making decisions based on built-in algorithms.

We see how the two financial systems differ, and cryptocurrencies look more efficient.

#BitcoinStability #FiatVolatility #CryptoVsFiat #FedAnnouncement #CryptocurrencyEfficiency