15h00 ▪
6
min reading ▪ by
Nicolas T.
The governor of the Bank of France lifted the anathema on bitcoin at the microphone of France Inter. A day to be marked with a white stone.
The taste for risk
François Villeroy de Galhau has put water in his wine, he who asserted two years ago that bitcoin “does not constitute a store of value, but rather a speculative asset akin to the tulip bulb bubble in the Netherlands in the 17th century”.
The governor changed his tone, reluctantly saying that everyone is free to invest their savings.
“It’s a risky asset. This does not mean that you cannot invest in Bitcoin, that is part of freedom. […] Some people want to take more risk and that’s their right”he declared.
The governor recalled that “the safest law in Finance is that there is an arbitration between return and risk. Some products yield more, but they are generally riskier.”
Certainly, but let's remember that in Finance, this arbitration is measured via the Sharpe ratio. That is to say the ratio between return and volatility (risk). Rate of return divided by the volatility rate.
We want this ratio to be as high as possible. If it is less than 1, the return is obtained at the cost of taking too high a risk. If it is greater than 1, outperformance is not obtained at the cost of too high a risk.
However, over the last four years, bitcoin has had a Sharpe ratio greater than 1. Compared to 0.78 for the American stock market and 0.67 for gold. It is even superior to the safest investment there is: US Treasury bonds!
The Trump effect
The governor's polite statements are not insignificant. They signal the end of attempts at murderous regulation at the G20 level. Bitcoin's victory is complete.
We owe this turnaround to the victory of Donald Trump who promised to create a strategic reserve of bitcoins during his electoral campaign.
“If elected, my government will keep 100% of all the bitcoins we already hold [208 000 BTC] or that we will square”he said during the bitcoin conference in Nashville last July.
He also stated that “it is current government policy that threatens the dollar, not bitcoin.”
That said, the United States knows that BRICS will not go back on the issue of foreign exchange reserves. Many nations no longer want to be entirely dependent on a Western-controlled monetary system.
It is no coincidence that central bank gold purchases are reaching records. And on this subject, do we hear the central bankers saying that gold would be a risky asset? Nope…
But then, why accuse bitcoin of being risky since it is gold but better? The Internet has replaced bookstores and it is difficult not to see that bitcoin could make gold obsolete.
Bitcoin is a technological breakthrough providing the world with a reserve currency that exists in absolutely finite quantity. Conversely, more and more gold is extracted every year…
This is a reality to which even central banks will sooner or later have to submit.
Why have you avoided bitcoin until now?
This distrust is largely due to the fact that some bitcoiners claim that bitcoin will overthrow central banks. Central bankers therefore had the reflex to stand together in the face of this seemingly existential threat. However, the idea that bitcoin can replace the fiat system has faded in recent times.
After the initial shock, the banking industry has now abandoned its fears. Ultimately, credit – that is, the ability to create money ex nihilo and destroy it upon repayment – is the keystone of a complex society. Bitcoin does not offer an alternative in this regard.
Moreover, the thesis which finally seems to achieve consensus among bitcoiners is that articulated by Michael Saylor. For the CEO of Microstrategy“bitcoin does not need to replace fiat currency to succeed”.
But then, bitcoin will not put an end to the exponential growth of the money supply, nor to the increasingly steep inflation due to the scarcity of energy resources? No.
On the other hand, it makes it possible to spread the bill for inflation. This inflation which hits ordinary people whose savings consist mainly of euros and which, conversely, enriches those who own rare assets (prestigious real estate, works of art, stock market shares, etc.). That is, assets that only those who are already rich can afford.
Bitcoin is revolutionary in that even small savers have access to it. Few people can afford a Haussmann-style apartment, but everyone can buy bitcoin for 50 euros.
Ultimately, wouldn't it be the end of privileges that is disturbing in high places?
Don’t miss our article: “Bitcoin – Rush of small investors in sight”.
Maximize your Cointribune experience with our 'Read to Earn' program! For every article you read, earn points and access exclusive rewards. Sign up now and start earning benefits.
Nicolas T.
Reporting on Bitcoin, “the goddess of wisdom, feeding on the fire of truth, exponentially growing ever smarter, faster, and stronger behind a wall of encrypted energy”.
