How market demand for Bitcoin might be affected positively by failed monetary policy ?

Othman Darwish

Frequent  failures of monetary policy  in world economics  would  positively affects the increasing demand of Bitcoins market. Central banks' monetary policy main objective is to target inflation, price stability and exchanges stability. In today traditional centralized economics , monetary policy  is driven by political desire, not economic necessity .In contrary, decentralize economy with virtual currency like Bitcoins  monetary policy is transparent, open for everyone ,  not  controlled by limited number of individual policy makers, and  implemented by a computer algorithm.

In underdeveloped countries, central banks are independent of government, yet they are still under its jurisdiction. In these countries, the ability for central bank to print money from thin air is significant source of revenue for the governments, if a government is fiscally constrained, it's going to print money at faster and faster rate, this kind of money supply - that is  not supported by economy growth - results in an imbalance in supply and demand for money, thus, increased inflation rate. This can be seen as raises in prices and loses of currency, the exchange rate dropped, and it becomes costly to hold cache as it loses its purchase power very rapidly. In such high inflation situations, people tends to seek for competing  currencies substitution like US dollar, but the governments, and  in order to support their currencies, force the central banks to impose restrictions and implement laws that keep people from opining USD dominated bank accounts. Here, Bitcoin  as digital currency  will be the safe and most a appropriate option for people to overcome  such situations.

Bitcoins has zero inflation rate, in contrary, it follows deflationary model , that is not traditional as it is planned and predicted.  The future value of Bitcoin is continuously raising and the total supply of Bitcoins is fixed and extremely controlled. The  ultimate cap in circulation of Bitcoins is 21 million by the year 2040, each Bitcoin is highly divisible into 100 million satoshis. The money supply is controlled by  computer algorithm which acts as monetary policy, the entire Bitcoin network system is designed in such a way that no one can change the policy even in the extreme situations. More important, Bitcoins as monetary policy is fully open and transparent as opposed to governments or central bank monetary policy. The Bitcoins policy by no means can ever changed by anyone and hence trust factor is high . From the other hand , the Bitcoins network is not controlled by any government or  central authority, it innovation as technology lies in the ability of making peer-to-peer payments in a decentralized network in the absence of trust between parties or in any other third party. The only way that government can crack the Bitcoin network is by shutting down the internet or confiscating   people personal devices.

Bitcoin, as  competing digital currency is alternative for  traditional inefficient monetary  policy implemented by central banks in the past decades, Bitcoins as a system impose limitations on the ability of governments to raise revenue through money creation. The value, transparency and trust of the  Bitcoins as a currency will increases its market demand.