In this article, you will see a comparison with detailed data about BTC in relation to inflation.
Bitcoin vs. Fiat Currencies: A Duel Against Inflation
In this comparison, we analyze Bitcoin (BTC), the pioneer of cryptocurrencies, in contrast with three of the most important fiat currencies in the world: the US Dollar (USD), the Brazilian Real (BRL), and the Euro (EUR). The main focus is to understand how each of these assets behaves in relation to inflation and as a store of value.
What are Fiat Currencies and Inflation?
Fiat currencies are those issued and controlled by a government, such as the Real or the Dollar. Their value is not backed by a physical asset (like gold), but rather by the trust that people place in the issuing government.
Inflation is the economic phenomenon that causes the continuous increase in the prices of goods and services, resulting in the loss of purchasing power of a currency over time. In other words, with the same amount of money, you buy fewer things today than you did in the past.
Bitcoin: The Digital Gold
Bitcoin is a decentralized digital currency, meaning it is not controlled by any central bank or government. Its main characteristic is programmed scarcity: there will be a maximum of 21 million units of Bitcoin.
CharacteristicDescription
Issuance
Decentralized, controlled by an algorithm (blockchain network).
Supply
Fixed and limited to 21 million coins.
Volatility
Historically high, with large price fluctuations.
Nature
Digital asset, often compared to "digital gold" due to its scarcity.
Comparative Analysis
We will analyze the performance of each currency against its own inflation and in comparison with Bitcoin.
US Dollar (USD) and Inflation
The Dollar is the world's primary reserve currency, considered one of the safest assets. However, it is not immune to inflation. Expansionary monetary policies ("money printing") by the Federal Reserve (the central bank of the US) aim to stimulate the economy but also dilute the value of the currency.
Historical Trend: The purchasing power of the Dollar has consistently decreased over the decades.
Recent Inflation: Just like in other parts of the world, the US has recorded a significant increase in inflation in recent years, impacting the cost of living.
Brazilian Real (BRL) and Inflation
The Real has a history of high inflation, especially when compared to currencies from more stable economies. Since its creation, the Real has lost a significant part of its purchasing power.
Historical Trend: Marked by peaks of inflation and currency devaluation against the Dollar. The history of inflation in Brazil before the Real Plan was hyperinflation.
Current Scenario: Inflation continues to be a constant challenge for the Brazilian economy, eroding savings and the purchasing power of the population.
Euro (EUR) and Inflation
The Euro, the currency of the Eurozone, was created to bring economic stability to the region. Historically, it has managed to maintain inflation more controlled than many other currencies.
Historical Trend: Relatively stable, but also subject to the monetary policies of the European Central Bank (ECB).
Recent Inflation: The Eurozone also faced a post-pandemic inflation surge, leading the ECB to raise interest rates, which had not happened in many years.
Comparative Table: Bitcoin vs. Fiat Currencies
AttributeBitcoin (BTC)Dollar (USD)Real (BRL)Euro (EUR)
Issuance Control
Decentralized (Algorithm)
Central Bank (Federal Reserve)
Central Bank of Brazil
European Central Bank (ECB)
Total Supply
Limited (21 million)
Unlimited
Unlimited
Unlimited
Main Function
Store of Value / Speculative Asset
Global Medium of Exchange / Store of Value
National Medium of Exchange
Regional Medium of Exchange / Store of Value
Protection against Inflation
Potentially high (due to scarcity)
Low (susceptible to printing)
Very Low (historical high inflation)
Low to Moderate
Volatility
Very High
Low
Moderate to High
Low to Moderate
Conclusion
The main difference between Bitcoin and fiat currencies lies in their monetary policies. While fiat currencies have an unlimited supply and are subject to the decisions of central banks, which can lead to inflation and loss of purchasing power, Bitcoin has a fixed and predictable supply.
Fiat Currencies: Lose value over time almost guaranteed due to inflation. However, they are stable in the short term and universally accepted as a medium of exchange.
Bitcoin: Has shown significant appreciation throughout its history, far surpassing the depreciation of fiat currencies. Its main appeal is protection against the monetary expansion of governments. However, this performance comes with extremely high volatility and significant risks.
Investing in Bitcoin can be seen as a bet on the continued devaluation of fiat currencies and the growing adoption of a scarce digital asset as a store of value. However, it is essential that any investor understands the risks associated with its volatility before making any decisions.
