Early today I was talking with a good trader friend, whom I respect very much, about Bitcoin. I said that "the U.S. dollar is going to zero relative to Bitcoin". My statement seemed to have ruffled his feathers quite a bit and he replied in a manner that suggested I was ludicrous for thinking that Bitcoin could ever be more valuable than the dollar, or that the dollar could ever go to zero.
Interestingly, though, the fact is that mathematically speaking, the U.S. dollar has already effectively gone to zero relative to Bitcoin over the past decade, as the above chart shows.
The equation 1 over BTCUSD is mathematically the same as USD/BTC or the relative value of the USD to BTC. As the chart shows, the USD is approaching zero relative to Bitcoin, and despite the "crypto winter" the trend is still holding up.
Notice, interestingly that the 20 EMA is resisting further declines in the relative value. While this single metric may not indicate the absolute bottom is in for Bitcoin, it is a fact that the USD/BTC equation suggests, to a higher degree of mathematical certainty, that the US dollar has already and will continue to move ever closer to zero relative to the value of Bitcoin. It's hard for people who do not understand logarithmic growth and decay to look at the Bitcoin chart and see anything but a shattered bubble right now (in 2022). I have seen multiple reputable traders try to impose a measured move on Bitcoin invalidly projecting it into negative numbers. Meanwhile, the trend is holding up, and between the US dollar and Bitcoin, over the long term, the logarithmic decay will likely continue for the U.S. dollar as measured relative to Bitcoin.
Indeed, the fact that the value of the dollar is going to zero on a relative basis is nothing new. This very fact is why we almost always have some degree of inflation, and very rarely deflation. With each new dollar printed the previously printed dollars are worth less. The chart below shows the downward movement of the value of the U.S. dollar toward zero relative to its past value. At some points in history, such as when the Federal Reserve moved away from the gold standard and when it began quantitative easing, the dollar's move toward zero has accelerated. This is logarithmic decay.
While the U.S. dollar is and always has been moving toward zero relative to its past value, it has not been until the past decade or so that a decentralized cryptocurrency using blockchain technology has come into existence as a means to hedge the dollar's decline. Anyone who does not hold any Bitcoin in their portfolio whatsoever as a long-term investment will regret it in the decades to come. Right now Bitcoin is on sale because the Federal Reserve has been reducing the money supply to curve inflation and temporarily giving the dollar a relative bump. This is a mere hiccup in the broader trend of the log curve growth in Bitcoin relative to the USD.
It's simple math and simple economics. Supply and demand dictate price. While the Federal Reserve will eventually restart the printing press and print limitless more U.S. dollars, the number of new Bitcoin coming into existence will be much less and is ultimately finite. Both Bitcoin and the U.S. dollar are fiats in the sense that the actual asset does not have inherent worth, both are merely valuable so long as people's faith in the underpinnings of the asset remains. While the U.S. dollar's status as the reserve currency diminishes over time, Bitcoin's adoption continues to grow.
Only time will tell which currency will be a better store of value over time, but the charts and the basics of economics make clear that a finite asset like Bitcoin inevitably is a better means of storing wealth than holding cash. So long as the money supply continues to grow exponentially, the value of the dollar will follow a logarithmic decay.
To have all your eggs in one basket, regardless of which basket, will likely prove a bad decision over the long term.
Interestingly, though, the fact is that mathematically speaking, the U.S. dollar has already effectively gone to zero relative to Bitcoin over the past decade, as the above chart shows.
The equation 1 over BTCUSD is mathematically the same as USD/BTC or the relative value of the USD to BTC. As the chart shows, the USD is approaching zero relative to Bitcoin, and despite the "crypto winter" the trend is still holding up.
Notice, interestingly that the 20 EMA is resisting further declines in the relative value. While this single metric may not indicate the absolute bottom is in for Bitcoin, it is a fact that the USD/BTC equation suggests, to a higher degree of mathematical certainty, that the US dollar has already and will continue to move ever closer to zero relative to the value of Bitcoin. It's hard for people who do not understand logarithmic growth and decay to look at the Bitcoin chart and see anything but a shattered bubble right now (in 2022). I have seen multiple reputable traders try to impose a measured move on Bitcoin invalidly projecting it into negative numbers. Meanwhile, the trend is holding up, and between the US dollar and Bitcoin, over the long term, the logarithmic decay will likely continue for the U.S. dollar as measured relative to Bitcoin.
Indeed, the fact that the value of the dollar is going to zero on a relative basis is nothing new. This very fact is why we almost always have some degree of inflation, and very rarely deflation. With each new dollar printed the previously printed dollars are worth less. The chart below shows the downward movement of the value of the U.S. dollar toward zero relative to its past value. At some points in history, such as when the Federal Reserve moved away from the gold standard and when it began quantitative easing, the dollar's move toward zero has accelerated. This is logarithmic decay.
While the U.S. dollar is and always has been moving toward zero relative to its past value, it has not been until the past decade or so that a decentralized cryptocurrency using blockchain technology has come into existence as a means to hedge the dollar's decline. Anyone who does not hold any Bitcoin in their portfolio whatsoever as a long-term investment will regret it in the decades to come. Right now Bitcoin is on sale because the Federal Reserve has been reducing the money supply to curve inflation and temporarily giving the dollar a relative bump. This is a mere hiccup in the broader trend of the log curve growth in Bitcoin relative to the USD.
It's simple math and simple economics. Supply and demand dictate price. While the Federal Reserve will eventually restart the printing press and print limitless more U.S. dollars, the number of new Bitcoin coming into existence will be much less and is ultimately finite. Both Bitcoin and the U.S. dollar are fiats in the sense that the actual asset does not have inherent worth, both are merely valuable so long as people's faith in the underpinnings of the asset remains. While the U.S. dollar's status as the reserve currency diminishes over time, Bitcoin's adoption continues to grow.
Only time will tell which currency will be a better store of value over time, but the charts and the basics of economics make clear that a finite asset like Bitcoin inevitably is a better means of storing wealth than holding cash. So long as the money supply continues to grow exponentially, the value of the dollar will follow a logarithmic decay.
To have all your eggs in one basket, regardless of which basket, will likely prove a bad decision over the long term.
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To subscribe to my YouTube channel:
youtube.com/@SpyMasterTrades
To follow me on X:
twitter.com/SpyMasterTrades
To tip me (BTC wallet):
bc1qvh48429042mdwvdthwlufx072g3ftffcts2q03
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
To support my work:
patreon.com/SpyMasterTrades
To subscribe to my YouTube channel:
youtube.com/@SpyMasterTrades
To follow me on X:
twitter.com/SpyMasterTrades
To tip me (BTC wallet):
bc1qvh48429042mdwvdthwlufx072g3ftffcts2q03
patreon.com/SpyMasterTrades
To subscribe to my YouTube channel:
youtube.com/@SpyMasterTrades
To follow me on X:
twitter.com/SpyMasterTrades
To tip me (BTC wallet):
bc1qvh48429042mdwvdthwlufx072g3ftffcts2q03
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.