"Sound money" refers to a form of currency that holds its value over time and is resistant to inflation or manipulation. Historically, gold and silver were considered sound money due to their scarcity, durability, and inability to be easily manipulated. Bitcoin shares many of these qualities, which is why it’s often called “digital gold.”

Scarcity: Bitcoin’s total supply is capped at 21 million coins. No more can ever be created, unlike traditional currencies that governments can print in unlimited quantities. This limited supply makes Bitcoin a deflationary asset—as demand grows, its value is likely to increase over time.

‍Divisibility: Each Bitcoin can be divided into 100 million smaller units called satoshis, allowing it to be used for small or large transactions. This divisibility makes it flexible for daily use as well as for significant investments.

‍Portability: Bitcoin can be transferred across borders within minutes, at relatively low costs. Unlike gold, which is cumbersome to move, or cash, which is subject to currency exchange controls, Bitcoin makes international transactions seamless and efficient.

Fiat currencies, like the Aussie or US dollar, are issued by governments and controlled by central banks. These currencies can be printed or inflated at will, leading to inflation and a gradual reduction in purchasing power. Inflation erodes the value of savings over time, making it harder to preserve wealth in the long term.

Bitcoin, on the other hand, has a fixed supply. No central authority can issue more Bitcoin or manipulate its value. This inflation resistance makes Bitcoin attractive as a long-term store of value, especially in uncertain economic times. As governments continue to print more money, Bitcoin’s value could remain more stable or even increase due to its limited supply and increasing demand.

Many people see Bitcoin as a store of value, much like gold. A store of value is an asset that preserves its worth over time and protects against inflation. As Bitcoin becomes more widely accepted and its adoption grows, it has earned a reputation as a safe haven asset, particularly during times of economic uncertainty or currency devaluation.

Just like gold, Bitcoin isn’t tied to any government or economy, making it appealing to those looking to hedge against potential instability in traditional financial markets. Its decentralised nature and growing legitimacy make it an increasingly popular way to protect wealth.

While Bitcoin is often regarded as a store of value, it can also function as a medium of exchange. This means people can use it to buy goods and services directly. In some countries, particularly where financial systems are less stable or government controls are stricter, Bitcoin provides an alternative way for individuals to engage in commerce without relying on traditional banks.

Moreover, Bitcoin is increasingly used for cross-border payments and remittances. It offers an inexpensive and quick alternative to traditional remittance services, which can be slow and costly. With Bitcoin, sending money across the world is faster and avoids the fees associated with banks or remittance providers.

The information provided by Elbaite is for general educational purposes only and should not be considered as financial or investment advice, a personal recommendation, or an offer to buy or sell any assets. It is prepared without taking into account individual financial objectives, situations, or needs and does not claim to address legal or regulatory requirements. We encourage users to conduct their own independent research and seek advice from qualified professionals before making any financial decisions.

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