One of the most fundamental and important features offered by Bitcoin is the waiver of third party instances.Bitcoin gives its users total control over their own wallet and the funds they contain.In other words, Bitcoin is protected by inflationary measures of the central bank in the form of negative interest rates.Bitcoin and negative interest rates? – Unimaginable.In addition, your own CTB can not simply be frozen.Nevertheless, they are subject to sanctions that define which payment flows can be made or not.
In the current economic situation in which we find ourselves, the subject of negative interest rates has not ceased to be addressed.
Especially in Germany, country of savers, the subject is vast.However, we often do not know exactly what lies behind this term and what Bitcoin relationship has to it.
So, what are the negative interest rates? How do they work and how can Bitcoin protect us from rampant expropriation through negative interest rates? Let’s take a look! Bitcoin and negative interest – What are negative interests?
Since the last major financial crisis of 2008, the central bank’s monetary policy has changed considerably.
The term “soft monetary policy”, better known in English as Quantitative Easing (QE), is also increasingly used in our language and describes the current behavior of central banks.In addition to this expansionary monetary policy, which logically puts more money in circulation thanks to the constant printing of new currency, negative interest rates have recently become a new tool of the central bank.This phenomenon affects not only the European Central Bank, but also those of Japan and other major economies.
The objective of negative interests is primarily to stimulate economic activity by “penalizing” the “holding” of money in the account.In other words, whoever sells money on the account must pay for storage instead of receiving a reward in the form of interest.
Initially, only the big banks were private banks.This means that initially, only the big banks had to pay penalties for day-to-day fund retention in central banks.At the same time, private banks such as Swiss bank Julius Baer have introduced negative interest rates for their wealthy clients.Keynesian economic policy: deflation as a devil
Again, the goal of a negative interest rate policy is at least to maintain the rate of currency circulation in the economy, but at best to increase it to avoid deflation.
Deflation would mean that our purchasing power is increasing while the price level of goods and services is steadily declining.in other words, goods and services become cheaper.
Some economists (but not all!) Consider this extremely critical, as falling prices lead people to accumulate more money than spending it.
This accumulation of money has in turn led to a stagnation of the economy, which has resulted in lower production levels and, as a result, an increase in unemployment.This would trigger the deflationary spiral.
This theory comes from John Keynes and may be called by some a Keynesian economic policy.
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Opinions on the economic consequences of negative interest rates are very diverse.However, it is generally accepted that negative interest rates not only weigh down savers, but also test banks’ business models and reduce their profitability.
For example, the CEO of UniCredit said that negative interest rates were good for the company but bad for the banks.By this it means that the cost of investing is now lower than ever before, which is beneficial for consumers who want to invest.
In addition, banks are suffering because they can no longer earn huge sums of money with their “credit” business model.
It can be summarized as follows: Many banks are under enormous pressure.Because they have to decide whether to pass on negative interest rates to their customers and are therefore exposed to the risk of discoloration of the customer or pay the costs themselves and thus reduce their own profitability.
The two CEOs of the two largest German banks, Christian Sewing (Deutsche Bank) and Martin Zielke (Commerzbank), also commented on negative interest rates and said they would have serious repercussions on certain sectors of the economy.For example, Zielke said the current monetary policy is not sustainable.The former CEO of the Swiss bank UBS, Oswald Gruebel, has even described the low rate policy as “crazy”.Bitcoin and negative interest rates – the summarized effects
The impact on the average citizen can be summed up in three key messages: Impairment of the bank balance due to negative interest charged potential (additional) depreciation of the bank balance or “savings” due to inflation if excessive monetary policy is pursued over a longer period a global economy that is generally more volatile and very sensitive to interest rate decisions by the central bank
Let’s see how Bitcoin is a solution to the problem of negative interests.
Bitcoin and negative interest rates – Bitcoin the solution?
Bitcoin is designed in itself so that the rate of inflation declines over time as regular events halve.So we can talk about a deflationary concept.
In concrete terms, this means that Bitcoin’s monetary policy is defined in its source code and its consensus rules.Negative interest rates are non-existent here.Nevertheless, we ask (briefly) the following question: are negative interest rates possible with Bitcoin?
The answer is that they are not intended and that they are in no way compatible with Bitcoin’s ideas.Nevertheless, it would theoretically be possible (very very unlikely) to apply negative interest rates to hold Bitcoin on the portfolio.
However, this requires a consensus within the network – so we reject this scenario, because the majority of network participants would reject it of course.
The prolonged debate over the size of Bitcoin blocks (keyword: Bitcoin Cash Fork) has shown how difficult it is to change Bitcoin mechanisms.A scenario in which taxes would be imposed on Bitcoin would be highly controversial and would only be considered if the maximum supply of bitcoins were reached and the transaction fees were not enough to motivate minors.But even here, there are other solutions.
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Although Bitcoin is often criticized for its high price volatility, this is exactly what makes Bitcoin.
Its price is not determined by a monetary policy subject to political pressure.Political interests, which are ultimately negative for the user, do not exist in Bitcoin.In other words: no Donald Trump, Recep Tayyip Erdogan or anyone else can tell Bitcoin what monetary policy looks like.
In addition, the attribute “digital gold” could help Bitcoin in the months and years to come to generate more “traction”.The persistent policy of low or negative interest rates will have consequences for the global economy.Especially when some economies sink into recession and that central banks no longer have the opportunity to lower interest rates to revive the economy.Yes, then, with its limited number and deflationary approach, Bitcoin could be a powerful antidote.If Bitcoin bulls are right, such macroeconomic factors, combined with the next half event, could push Bitcoin prices to new heights.
However, one thing is certain for the moment: although Bitcoin still has to overcome some scalability and adoption hurdles, we do not need to worry about negative interest rates on BTC.
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