Bitcoin is a Monetary Expansion Hedge

Partial transcript follows:

06:52 Burnett: In the Bitcoin community we have talked about this term called “hyperbitcoinization” which can mean different things to different people. Whether its bitcoin being a treasury reserve asset for individuals, corporations, governments, or bitcoin being this world reserve currency that’s not only just this savings technology but is also a medium of exchange. How would you define hyperbitcoinization, and do you think that it can occur?

07:21 Mahmudov: I think it can certainly occur. Because the nature of fiat money is such that it requires constant economic expansion in order to stay afloat. As long as, when the expansion slows down, or god-forbid, actually shrinks, then the fiat system or constantly expanding credit system that’s underlying it cannot sustain itself any longer. No attempt at fiat money or tight monetary control has survived over a long period. You can say that Romans manipulating the metal content in their coins obviously, widely considered to be one of the reasons for the falling apart of the Roman empire. The ancient Chinese a few times have also tried using paper money that’s not backed by anything in sort of this chargeless manner as the default money. But of course that has led to certain hyperinflationary periods as well.

08:31 Mahmudov: Ultimately, I do believe that the internet will produce a money that will supplant, in its power and size, all of the current government-mandated currencies in the world, and as it currently stands I think bitcoin has the highest chance of becoming that dominant currency. Hyperbitcoinization, I believe in 2013 or 2014, started out as almost like a meme-like concept but ever year its looking more and more likely. Not every year but I should say every cycle, every sort of bitcoin halving, its looking more and more likely as of right now.

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19:12 Burnett: So how would you respond if someone that’s maybe not following financial markets too closely, they see, hey, inflation is near record highs, but bitcoin has been down, you know, year-over-year significantly. How would you respond to that?

19:24 Mahmudov: Technically bitcoin isn’t a hedge against inflation, its hedge to monetary expansion, and inflation usually follows monetary expansion with a delay. But if you actually chart monetary expansion graph, as well as a bitcoin price graph, or, to be precise, the rates of change of both of these, then they go hand-in-hand and they have for the past six or seven years. So the correct description of bitcoin, in my opinion, is a hedge against monetary expansion rather than inflation per se. Inflation is simply a by-product of the actions that governments and central banks have been taking.