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Lockdowns Led To More Workers Getting Paid In Bitcoin

The reasons for Bitcoin’s rise include a variety of factors, such as COVID-19, work from home, and inflation. In the US, people are thinking about Bitcoin as a savings account. From the end of 2019 to the end of July 2020, the U.S. money supply grew 20% from $15.33 trillion at the end of 2019 to $18.3 trillion at the end of July. 

According to reports, fast-rising housing costs have led to the largest growth in inflation since 2008. Shelter costs rose 0.5% between May and June, according to the monthly consumer price index released in July. Shelter costs were up 2.6% compared with a year prior. Housing is quickly becoming more expensive. 

Inflation reared its ugly head in the stock, too, which in 2020 increased by approximately 30%. According to a recent note by HSBC’s Chief Investment Officer Xian Chan, concerns over persistent higher inflation have subsided, as the markets appear to have gotten used to the concept. So much for transitory inflation. 

Young Americans are starting to get their real first tastes of inflation, and it’s leading them to Bitcoin, which they view as a safe haven asset. Real assets are increasing in price substantially, causing the price movements in Bitcoin. People recognized last year that they needed a new store of value. 

United Soccer League (USL) player Alex Crognale of Birmingham Legion recently became the first athlete to receive his salary in Bitcoin. This is quite interesting as the phenomenon is becoming popular. 

In countries like Argentina, Brazil, and elsewhere in Latin America, people are used to the concept of inflation, which has been skyrocketing since the COVID lockdowns. Latin American policymakers are increasing their borrowing costs as, in the last five weeks, central banks in Brazil, Mexico, Peru, Chile and Uruguay have increased rates. El Salvador President Nicolai Bukele contarily spearheaded a Bitcoin law there which declares Bitcoin legal tender. 

Faith in local currencies is on the decline. Citizens are unsure if their currency will hold its value over time, and they’re right to show concern. Therefore, they’re more and more opting to receive salaries not in their local currencies, but in Bitcoin or stablecoins. Once an individual in the above-mentioned countries receives their Bitcoin salary, for instance, they have a few options.

While some hodl their bitcoin, others choose to sell the bitcoin to capitalize on Bitcoin’s comparatively high premium in countries suffering inflation woes. The premium doesn’t get arbitraged out in these markets, because the countries will often have capital controls that restrict your ability to transfer your local currency to dollars.

The premium exists because people in countries with capital controls understand the value of Bitcoin. Say a freelancer is based in Argentina. They contract with a US company who sends them BTC based on the US premium. The Argentine freelancer can then sell those Bitcoin’s in Argentina for a higher premium to earn extra income.

Technology startups in particular realize that employees should have an ability to get paid in a medium where they’re saving rather than losing wealth slowly over time. That’s why big companies are looking to Bitcoin as a payroll solution, such as Twitter and the Miami government. As Twitter CFO Ned Segal noted, the company had considered adding Bitcoin to its books or using it to pay employee salaries. 

“We’ve done a lot of the upfront thinking to consider how we might pay employees should they ask to be paid in Bitcoin, how we might pay a vendor should they ask to be paid in Bitcoin, and whether we need to have Bitcoin on our balance sheet,” said Segal.

The City of Miami had a similar point of view.  “It is wonderful that our city is so advanced in terms of cryptocurrencies and I want to thank my colleagues at the Commission for allowing this to happen,” said Miami Mayor Francis Suarez. 

It comes down to the fact that people should have an option to get paid in a deflationary currency, where their family can store their wealth for generations to come, as opposed to just an inflationary fiat currency. People are going to start demanding it, too. This trend will continue as COVID is a catalyst for remote work and Bitcoin. 

Bitcoin, however, has two formidable barriers to entry. The first is volatility. The second barrier to entry is public and private key cryptography. It’s an important concept for people to know, as well, because you have to understand how to protect your private keys. The volatility of Bitcoin might be a concern for those opting for stablecoins. 

For that reason, most people are not asking to be paid exclusively in bitcoins. Instead, many people opt for stablecoins, which serve as a stepping stone for those wading into the waters of public and private key cryptography. They learn about wallets, private keys, public keys, and more. What happens when the USD becomes increasingly volatile or inflated? It will be easy for these people to switch from stablecoins to Bitcoin. 

There are many reasons somebody would want to get paid in Bitcoin. They view it as a store of value, efficient, a hedge against inflation, and censorship resistant. For those reasons and others, people are increasingly asking to be paid in the future.

Three years later, Bitcoin has emerged as a safe-haven, and hyperbitcoinization seems like a foregone conclusion.

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