Hello readers!

It was a pretty wild week for Bitcoin. The news story that captured the most attention was the approval and subsequent launch of not 1, not 2, but 11 spot bitcoin ETFs. I’m no fan of Wall Street, but the ability for old-school investors to gain exposure to bitcoin in their portfolios is a big deal. I don’t write about price in The Bitcoin Beat, but it’ll be interesting to see how things play out in the coming months before the halving in April.

Let’s take a quick look at that and other important stories about Bitcoin from the past week.

Last Week in Bitcoin

Mercari plans to accept bitcoin payments

Mercari, an e-commerce secondhand market based in Japan, is planning to allow its users to buy products on the platform using bitcoin, according to The Block. Mercari boasts over 22 million monthly users and is one of the most popular e-commerce platforms in the country. The company is no stranger to integrating Bitcoin - it launched an exchange that allows users to buy bitcoin in the Mercari app back in March 2023.

Spot bitcoin ETFs approved by the SEC

11 spot bitcoin ETFs were approved on Wednesday (1/10/2024) by the SEC and began trading on Thursday (1/11/2024). It was a bumpy two days thanks to the SEC’s X account being compromised (multi-factor authentication is important, boys and girls). This resulted in an unauthorized, quickly-deleted tweet being sent out that confirmed the approval of the spot bitcoin ETFs. We had to wait another day for the official announcement, but it finally happened. These ETFs mark the first real embrace of Bitcoin by traditional financial institutions.

Bitcoin Victoria Falls launches circular economy in Livingstone, Zambia

The first Bitcoin Circular Economy in Zambia launched this past week. The effort, headed by Bitcoin Victoria Falls, plans to “drive financial empowerment, Bitcoin education, Bitcoin tourism, and economic opportunity” in Livingstone, a city of over 100,000 people located near Victoria Falls. The program will offer Bitcoin education along with helping small businesses and merchants to accept payments in bitcoin. You can learn more about the story behind the project and contribute to Bitcoin Victoria Falls on Geyser.

Beginner Bit: What is fiat?

If you’re not in the know, the first thing that comes to mind when you hear the word “fiat” is probably this:

Niiiice.

But when it comes to money, fiat doesn’t mean “tiny slick Italian car.” Fiat is any currency issued by a government with no physical commodity (think gold) to back its value¹ . The US dollar, the British pound, the Japanese yen, and any other currency issued by a government today fall into the fiat category.

This hasn’t always been the case. The currencies of the world used to be backed by physical commodities, most often gold. In the United States, dollars could be converted for the appropriate amount of gold, but this ended in 1933 after the Emergency Banking Act was passed. Any ties the US dollar had to gold, known as the gold standard, were severed by President Richard Nixon in 1971.

So if US dollars and other fiat currencies aren’t backed by gold or some other commodity, how do they have value?

The simple answer is that a government says it has value and the people have faith in that government. The US dollar, for example, is backed by faith in the stability of the United States government and the continued success of its economy. Naturally, like any other system, fiat has its pros and cons. But those pros and cons depend on who you ask.

For example, proponents of fiat might argue that government-issued currency allows a government, more specifically a central bank, to react quickly to an economic crisis to blunt its impact on its citizens. This is precisely what the Federal Reserve, the central bank of the United States, did in response to the economic crash caused by the COVID-19 pandemic in 2020² . This allowed the US government to pass the CARES Act and the American Rescue Plan Act.

While I’d argue that offering timely relief during negative life-altering events is exactly what a government that serves the people is supposed to do, it's important to look at how a government can react so quickly: by printing new money, which in the United States is a function of the Federal Reserve. Printing money brings us to a con that Bitcoin helps to fight: inflation. Inflation is one of the major issues for which Bitcoin acts as a problem-solving tool.

What is inflation and how does it relate to fiat? We’ll take a deeper look next week.

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Next week, we’ll learn more about inflation and its role in the fiat system.

Until then, have a wonderful week!

-groovin’

Disclaimer: The content above is not financial advice. The Bitcoin Beat is an educational newsletter and does not offer financial advice.

Sources

1. Chen, J. (2023, July 5). Fiat Money: What it is, how it works, example, Pros & Cons. Investopedia. https://www.investopedia.com/terms/f/fiatmoney.asp

2. Schrotenboer, B. (2020, May 13). Us is `printing’ money to help save the economy from the COVID-19 crisis, but some wonder how far it can go. USA Today. https://www.usatoday.com/in-depth/money/2020/05/12/coronavirushow-u-s-printing-dollars-save-economy-during-crisis-fed/3038117001/