Bridging the Economic Divide: A Fresh Look at Bitcoin’s Role

Friends, we have a problem! In today's world, economic inequality is a growing concern, with a significant divide between the wealthy and the average citizen. I did some research and came across something called the "Cantillon Effect." Bear with me! After reading this article you will have a new perspective on money. Let’s dive into it!

This concept highlights how those closest to the creation of new money, like big banks and corporations, often get richer, while the rest of us feel the squeeze with slower wage growth and rising costs of living.

In principle, the traditional economic system and decentralized cryptocurrencies work in different ways.

Consider the aftermath of the 2008 financial crisis: governments and central banks around the world, particularly the U.S. Federal Reserve, pumped money into the economy to stabilize it. This process, known as quantitative easing, aimed to encourage lending and investment. Free money to the people might sound great! But here's the catch: the first in line for this new cash were the big banks and corporations. They enjoyed low borrowing costs and saw the value of their stocks and real estate soar. Meanwhile, average Joe faced stagnant wages and a slow recovery. This is called the Cantillon Effect, showcasing how those at the top benefit, while the rest lag behind.

Here's were Bitcoin, steps into the picture. Unlike traditional money, which central banks can create endlessly, Bitcoin has a finite supply. Do you remember that there's a cap of 21 million Bitcoins? Some say this makes Bitcoin even more scares than gold and I would agree. But more importantly, Bitcoin is decentralized. This means no single entity, such as central banks or an organization controls its creation or distribution, making it less prone manipulation and inequalities inherent in the traditional financial system. However, I would also like to raise a growing concern in crypto community regarding the decentralization of Bitcoin. Critics claim that major traditional financial players are gaining power over Bitcoin since the introduction of Spot Bitcoin Exchange-Traded Funds in the US. At time of writing $500 million of Bitcoin is bought every day by the likes of iShares Bitcoin Trust (IBIT), Fidelity Wise Origin Bitcoin ETF (FBTC), and Bitwise Bitcoin ETF (BITB). Yes, Blackrock is loving Bitcoin as well and the price of Bitcoin is increasing steadily. Bitcoin is on the same path as gold was in 2004 when gold was first offered as a ETF in the US.

Bitcoin offers a level playing field: anyone with internet access can participate in its economy, regardless of their location or status. Put differently, central banks can print traditional money out of thin air, but bitcoin has a limit, and everyone can get access immediately.

While Bitcoin alone won't solve all the issues of economic inequality, it represents a significant shift towards a more equitable financial system. By offering an alternative to the traditional banking system, it could help mitigate the effects of the Cantillon Effect, ensuring that the creation of new money benefits a broader segment of the population.

As I consider the role of Bitcoin in addressing economic inequality, I find myself at a crucial juncture. The Cantillon Effect sheds light on the inequalities in our current financial systems, where the privileged few benefits from the creation of money while others struggle with low wages and rising expenses.

Bitcoin offers hope by introducing a limited supply and a decentralized structure. However, concerns arise as it gains popularity, with worries about traditional financial players using influence over its direction. I think Bitcoin provides a chance for people to feel empowered, allowing anyone, no matter their background, to take part in a more equitable economy. While it won't fix every economic issue, it does move us closer to a fairer future.