Niall Ferguson, historian and senior fellow at the Hoover Institution at Stanford University, says bitcoin is winning the Covid-19 monetary revolution. Ferguson calls the virtual currency a great place for the wealthy to store their wealth, but also notes that bitcoin’s resilience has forced critics and institutional investors to change their views on the leading crypto.
Cash usage is declining
Ferguson cites bitcoin basher Nouriel Roubini alongside a financial journalist as some of the critics who now have doubts about bitcoin. In a opinion piece, Ferguson explains that before Covid-19 hit, there was already a financial revolution underway with cash as the main victim.
To support his belief that a financial revolution is underway, the historian says that in “some parts of the world – not just China but Sweden – almost all payments are now electronic.” In the US, debit card transactions exceeded the number of cash transactions since 2017. In Latin America and parts of Africa, cash is giving way to cards and mobile money.
However, Ferguson says, like what other pandemics have done in the past, Covid-19 has accelerated the current monetary revolution. Ferguson emphasizes the story that bitcoin is now a better hedge against inflation and compares the digital asset to the US dollar and gold.
In comparison, Ferguson says the “dollar spot index is down 4% since January 1. Gold, on the other hand, is up 15% in dollars. But the dollar price of a bitcoin is up 139% since the beginning of the year. “
Next, the historian explains the factors behind bitcoin’s performance as follows:
What may have taken 10 years has been accomplished in 10 months. People who had never ventured an online transaction before had to try it for the simple reason that banks were closed. Second, and as a result, the pandemic has significantly increased our exposure to financial supervision and financial fraud. Both trends were good for bitcoin.
The Digital Gold Narrative
Ferguson, who has previously argued that bitcoin will never go to zero after the plunge in late 2017 and 2018, doubles down on this argument in an updated version of his book. In the book, he argues “that bitcoin had established itself as a new store of value and investment asset – a type of ‘digital gold’ that offers investors guaranteed scarcity and high mobility, as well as low correlation with other asset classes.”
Meanwhile, the historian also covers bitcoin’s embrace by wealthy individuals and institutional investors. The hug has supported a bull run that bitcoin has seen violate previous highlights. In the past, Ferguson argued that “if millionaires jointly decided to hold only 1% of their assets as bitcoin,” the price would be $ 75,000.
Ferguson recognizes that bitcoin has three obvious flaws, and these include “non-trivial” transaction fees, low transaction throughput and its “slow” use as a means of payment. Nevertheless, these drawbacks outweigh two unique features of bitcoin: scarcity and sovereignty.
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