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Yes, absolutely. Tether is a stablecoin that was supposed to be 100% backed by USD, but there were a lot of doubts about this, lack of transparency on the back

Yes, absolutely. Tether is a stablecoin that was supposed to be 100% backed by USD, but there were a lot of doubts about this, lack of transparency on the backing and they did break the peg briefly. Now since tether can be used to buy Bitcoin, this indirectly inflated the price of Bitcoin as well. All of this and more already has happened in DeFi. The problem is as long as you can use any currency X to buy Bitcoin, simply printing X and using it to buy Bitcoin will inflate the price of Bitcoin as well. Even in a world of only cryptocurrency, lending money indiscriminately can inflate the amount of Bitcoin that is available to spend. Even if there are only 21M bitcoins but people collectively believe they have access to say 25M due to lending or investing, the same thing happens. What if the bitcoins are invested in a company whose market value crashes because of changing expectations? Just like today, people's net worth craters. After a lot of reading and thinking I reached the same conclusion. Inflation, bad lending, leverage, bank runs, crashes etc. are all inherent risks of any financial system whatsoever because they reflect deeper truths about human nature. No currency can fix that.

sph 4y ago
> The problem is as long as you can use any currency X to buy Bitcoin, simply printing X and using it to buy Bitcoin will inflate the price of Bitcoin as well. That's a tautology. If you print dollars, you'd inflate the BTC price because dollars are less valuable, so the BTC/USD exchange price will increase. In a vacuum, with no other variables, Bitcoin's value by itself has remained unchanged. This is why in theory Bitcoin is seen as an inflation hedge (though not in practice for a ton of reasons). If dollars get inflated, Bitcoin rises compared to the dollar. The market is always relative to something else.

sph 4y ago

> The problem is as long as you can use any currency X to buy Bitcoin, simply printing X and using it to buy Bitcoin will inflate the price of Bitcoin as well. That's a tautology. If you print dollars, you'd inflate the BTC price because dollars are less valuable, so the BTC/USD exchange price will increase. In a vacuum, with no other variables, Bitcoin's value by itself has remained unchanged. This is why in theory Bitcoin is seen as an inflation hedge (though not in practice for a ton of reasons). If dollars get inflated, Bitcoin rises compared to the dollar. The market is always relative to something else.