[fauigerzigerk]

>don't crypto currencies amplify the causes of inflation

How so? Isn't the risk rather that central banks would lose the ability to fight deflation if something like bitcoin were to replace fiat currencies?

In this particular case we're talking about stablecoins though, which are a wholly different beast. I think the potential problems (and benefits) for countries where the local currency is replaced by a dollar linked stablecoin are exactly the same as the problems caused by other forms of dollarisation.

https://www.elibrary.imf.org/display/book/9781589061767/ch03...

[ecocentrik]

Stablecoins are not a different beast. I'm going to assume they are heavily regulated in the US and Europe now but in the past they were used to amplify speculative bubbles in cypto by operating as unbacked fractional crypto dollars that only received value once a retail investor exchanged their currency for a stablecoin. I will also assume that not every country has enacted regulations that would restrict this kind of behavior and that there are still loopholes that money launderers and scammer can use.

[fauigerzigerk]

Stablecoins linked to USD do not reduce the effectiveness of US monetary policy. In that sense they are fundamentally different from Bitcoin.

Things look very different from the point of view of all other countries of course.

[ecocentrik]

Bitcoin does not reduce the effectiveness of US monetary policy either. It has been described as a hedge against inflationary monetary policy but that is only true of Bitcoin if you only buy below the median trend price and have a long > 2 year time horizon. If you have a 6 month time horizon, then you can only really afford to buy Bitcoin at the bottom and should really be using risk free assets like CDs to hedge against inflation.

Speculative gain in Bitcoin does not make it a hedge against inflation, it makes it a speculative vehicle. As Bitcoin becomes less speculative, I really don't even see it being able to sustain enough interest to be a hedge against anything.

[fauigerzigerk]

>Bitcoin does not reduce the effectiveness of US monetary policy either.

IF Bitcoin were to replace the dollar (and that was the premise if you look further up in this thread) then by definition US monetary policy would cease to exist and therefore lose its effectiveness.

This has absolutely nothing to do with the price of Bitcoin. It's a structural feature of Bitcoin because governments do not have the power to increase the supply of Bitcoin.

A dollar linked stablecoin on the other hand does not have this structural feature (for the US). This is the difference I'm talking about.

For other countries the situation is quite different because dollarisation in any form (stablecoin or otherwise) means giving up their own monetary policy.

[ecocentrik]

Please keep mansplaining your ponzi scheme as if everyone on this planet hasn't already heard the same weak sales pitch.