Bitcoin is not used in real life, yet it somehow retains value. Meanwhile, there are useful cryptocurrencies like Tether. If Tether becomes widely adopted for payments and transactions, don't you think Bitcoin could become worthless?
Bitcoin and Tether serve fundamentally different roles in the crypto ecosystem, and their values are tied to very different factors.
Value is based on scarcity, decentralization, and being a store of value. Often referred to as "digital gold."
Value is pegged to the US dollar. Its purpose is stability and ease of transaction, not long-term holding or investment.
While Tether may indeed become more widely used in real-world payments due to its stability, this does not necessarily threaten Bitcoin’s value. In fact, the more Tether is used, the more people may need Bitcoin to exit centralized systems or protect themselves from inflation or capital controls.
Adoption of stablecoins like Tether
Increased demand for decentralized assets like Bitcoin (as a hedge)
Bitcoin's value is not derived from its utility as a currency in day-to-day commerce. Instead, it holds value as a non-sovereign, deflationary asset—a kind of insurance policy against fiat currencies and financial instability. Many investors do not expect to spend Bitcoin but to hold it over time.
In summary, Bitcoin and Tether do not compete in the same category. One is a tool for transactions, the other is a tool for preserving value. Even if Tether becomes the dominant medium of exchange, Bitcoin may still retain—and even grow—its role as a long-term store of value.
Money is fundamentally created through credit. Banks do not need to possess gold—they can simply write down an amount on paper and hand it over to someone, thus creating credit. Of course, this is an extreme view; in reality, national power, military force, and gold reserves back the value of currency. But theoretically, "money is born simply by being recorded"—this is the essence of credit creation theory. Is this correct?
Your understanding captures the core principle of credit creation quite accurately, especially as it applies to modern fiat money systems.
Creation is constrained by physical gold reserves. Banks must hold a reserve of value.
Banks can create money by issuing loans and recording balances, even without holding physical assets—backed only by trust, regulation, and central bank oversight.
What you describe—creating money simply by recording a debt—is indeed the essence of endogenous money theory. In modern economies, commercial banks generate new money when they issue loans. They don’t "lend out deposits" but rather create deposits in the process of lending.
Loan issuance by commercial banks
Creation of new money (bank deposits)
This mechanism is overseen by central banks, which control interest rates and liquidity but do not directly limit the amount of credit money created. The government’s role—through regulation, deposit insurance, and central bank backing—ensures that this "trust-based" money remains stable.
In short, yes: your summary is broadly aligned with the theory of credit creation. The only nuance is that this process depends heavily on the institutional trust and legal infrastructure behind the banking system. Without that, simple "recorded money" would lose its credibility and functionality.
MicroStrategy, now a large corporation, and major financial institutions introducing Bitcoin ETFs have helped Bitcoin gain legitimacy. Could it be that Bitcoin—like fiat money—is trusted simply because it is programmed and circulated?
It may sound like a fairy tale, but paper money originated from promissory notes issued by goldsmiths. Today, banks can essentially create money just by recording it.
If that's the case, perhaps it doesn’t matter whether Bitcoin is used in the real economy. What truly matters is whether it circulates like a promissory note. Given the enormous trading volume it sees every day, could we say it already holds value in the same way those notes once did?
Your analogy is historically grounded and conceptually sharp. What you're pointing out is that circulation precedes utility, and trust can arise from movement alone—not necessarily from underlying use.
In economic history, the promissory note became money not because people redeemed it, but because they passed it around. Bitcoin arguably operates on a similar logic: its credibility grows not because it is spent on coffee, but because it is bought, held, traded, and referenced in financial systems.
Frequent trading and institutional endorsement
Perception of value and monetary legitimacy
So yes, you can reasonably say that Bitcoin has followed a similar trajectory to early paper money. It may not be backed by force or redeemable for gold, but it has achieved something just as powerful: persistent circulation among willing participants. In the end, that may be all money has ever needed.
