An economist at the London School of Economics has expressed worry over the continuous rise in the leading cryptocurrency. The expert, Jon Danielsson, has penned down his opinion on the increasingly growing crypto industry. He sees the constant surge in Bitcoin as not only a recipe for inequality but also a dangerous trend that portends danger for the future of financial markets. However, the economist added that society would have taken the necessary step before such a colossal consequence. Danielsson said these in his article titled, “What happens if Bitcoin succeeds?”
The Imbalance created by Bitcoin is widening every day
The London-based scholar opines that most people will be reluctant to be in a society ruled by cryptocurrencies. The reason, he says, is that the whales— those who hold a vast amount of Bitcoin— would be the wealthiest people worldwide, literally ruling over the masses in a way akin to the rulership of the autocrats and emperors in the stone age. And the consequence will be a wide socio-economic gap between the “whales” and the masses, who will inevitably be the subject of the modern-day crypto emperors.
The Bitcoin blockchain has been reflecting a wide degree of inequality of late. A study by Glassnode reveals that only 2% of Bitcoin users hold 71% of the total Bitcoin in supply. The study added that “whales” who hold between 1000 and 5000 Bitcoin constitute 18% of the total number of Bitcoin holders. Also, “humpbacks,” who hold 5000 Bitcoin and above, constitute 13% of the total number of Bitcoin holders (an equivalent of $91 billion). Such whales refer to institutional investors, hedge funds, custody, and wealthy individuals.
A Dollar Worth of Bitcoin in the Past Has Risen in Value
Surprisingly, those who invested just a few dollars in Bitcoin years back are now extremely rich. Last week, some whales transferred ancient Bitcoin to other accounts. In 2010, such a tremendous amount of money was worth only one dollar.
According to Danielsson, after the Bitcoin aristocrats have amassed a large chunk of money to spend, what message are they passing to those at the lower end of life? It is quite clear that such a wide inequality gap has a likelihood of widening the socio-economic gap between the wealthy and the masses. When the Bitcoin aristocrats become threats to others, the government will have no other option than to fight back to protect the other citizens. If the government fails to take the necessary step, there is bound to be sociopolitical instability.
Daniels further states that if the rise in Bitcoin price is not kept in check, it may displace government-backed currencies and cause an evolutionary change in society. Consequently, holders of fiat currencies will be made to suffer a massive loss. Bitcoin aristocrats who have amassed more crypto money to spend at the expense of fiat currencies will be the ones to enjoy. However, if Bitcoin successfully outranks fiat currencies, there lies ahead severe consequences. To avert such a condition, governments must take a bold step to curb the rise and use of Bitcoin and other cryptocurrencies at the expense of fiat currencies.