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Bitcoin's New All-Time Highs & the Global Search for Sound Money

While often dismissed as isolated cases of monetary mismanagement or government corruption, various sovereign fiat currencies around the globe are in the midst of collapsing. It’s worth reflecting on the fact that the price of bitcoin denominated in these local currencies (such as the Argentine peso, Turkish lira, and Lebanese pound) is currently making new all-time highs.

While these circumstances clearly reflect the collapse of these currencies against the US dollar, the reality is that all fiat currencies (the USD included) are ultimately collapsing against bitcoin. Moreover, these incidents are far from isolated – several other countries including Egypt, Ghana, Laos, Nigeria, Pakistan, Sudan, and Suriname are witnessing bitcoin inch towards its peak all-time values.

This phenomenon prompts a fundamental question: why is this decentralized currency gaining prominence, particularly in economies grappling with financial instability?

One might argue it's the relative nature of money. Traditional financial theories assert that individuals, as well as entire economies, tend to gravitate towards reliable monetary systems that ensure value preservation over prolonged periods. While transactions/commerce might still occur in what economists term "bad" or "soft" money, the preference for savings often tilts towards "good" or "hard" money.

Gresham’s Law, a foundational concept in monetary economics, posits that "good money drives out bad money." In the context of our modern global economy, bitcoin emerges as a prime candidate for this "good money" given its programmatically hard-capped supply. Despite being in the early stages of its adoption curve, bitcoin’s relative undervaluation makes it a desirable store of value. In contrast, sovereign fiat currencies like the US dollar, which could be considered overvalued in certain contexts, are more suitable for transactions, serving primarily as mediums of exchange.

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