Bitcoin, Ethereum, Dogecoin and Alt-Coins Words like these cause hysterical responses. There is a tendency for people to be enthusiastically optimistic or comple1tely skeptical of cryptocurrency. While there is a lot of controversy surrounding cryptocurrency, the majority of cryptocurrency experts are beginning to shift their tone. This raises one to think: Why has this went wrong and what is the reason they are beginning to consider cryptocurrency as a serious issue?
It is definitely becoming more popular. To meet the demands of customers, Vast Bank in the U.S. has partnered with Coinbase to let customers to make crypto transactions using their bank accounts. Having observed a top cryptocurrency exchange cooperating with a major cloud ERP service for digital accounting solutions. I’m convinced that cryptocurrency will have a major role to play in the global financial system and also in our daily lives.
However it was not until recent that many of the most reputable names in finance rebuked crypto as a gambling device’, having no value’, having zero credibility ‘indecent”, ‘rat poison’ and the like. One highly respected investor declared that he would rather use bananas over Bitcoin, because bananas are worth more.’
I confess that I used to be with them, and also saw crypto in the exact similar way.
But I’ve shifted my view. The majority of crypto-related commentators are shifting their views on the subject. Some have apologized for their doubts and others have begun planning to create their own cryptocurrency within some of the largest financial institutions.
The True Value of Money
The first time paper money was introduced in China over a thousand years ago, was received with confusion and was widely disapproved of. Like crypto today is not the government who first invented the concept. In the early days, when large-scale transactions using coins proved to be difficult the merchants developed the idea of using pieces of paper were adorned with written text on them that indicated its worth. Transactions were made with the hand-written note, following which the parties walked through warehouses where exchange of coins occurred.
In the course of time, the warehouses that held huge quantities of large coins eventually became one of the very first bank. With the rise of paper and was banned by the government, it was subsequently banned and, surprisingly, later it issued their own currency that were legal tender and the first genuine paper currency was created.
Incredibly, more than a thousand years after those first paper notes were prohibited, China has now banned cryptocurrency. Can history repeat itself by China repeating what it did in the past millennium but this time creating an official cryptocurrency? El Salvador on the other is a country that recently declared Bitcoin as a legal tender. This proves how different the perceptions of cryptocurrency are and as a result are we currently just beginning to see the re-invention of money?
A Currency Must Evoke Confidence
A $50 note that you carry around in your wallet is not worth anything at all. To put it in the context of a banana the note itself is less valuable than the value of a banana. However, we are confident in this note and purchase a lot of bananas using it.
The moment the US Dollar was removed from the Gold Standard in 1977 a majority of the top bankers and economists were frightened. If that $50 bill in your wallet was no longer an exchangeable currency for real gold, they believed that there could be an outpouring of panic and a failure of the system of monetary exchange. This has not happened or even occurred. The US Dollar has been the solid foundation for a large portion of the world’s economic expansion for more than half a century today. Actually, many believe that today’s expansion would not have been possible if Dollar was not based in its gold-standard.
Similar to what happened with numerous other currencies. In the present the concept of currency is simply another word to describe confidence. If a country can maintain confidence in its currency it’s all good. However, as we’ve witnessed in nations that have confidence in their currency is diminished and it is not uncommon for the economy (and economy) is ruined, with devastating effects for the populace.
Scarcity Drives Bitcoin’s Value
In a cashless economy, in which the need for coins and notes is vanishing rapidly, we remain certain that the digital number on our bank statement worth something. The majority of currency is now digital. However, cryptocurrency and digital currency are not the same thing.
Digital currency is essentially its digital version of nation’s fiat currency, which is regulated and issued legally by the central bank. However, cryptocurrency is generally created privately through an encrypted blockchain system in which the value is dependent on demand and supply. Gold is extracted and its value is determined on demand and supply.
Both Gold as well as Bitcoin are highly valuable due to their rarity. We don’t know the amount of gold is available on Earth however, we do know that there will one million bitcoins. However, no one knows the number of US dollars there will be. With the current round of stimulus, an additional US$3.5 Trillion is added to the supply of money (Just to put it in context, when adjusted for inflation, this is approximately the same amount that the US used to fund World War II).
However, wasn’t gold meant to be our inflation hedge that was not tied to governments that we could use during times of uncertainty?
The Quest for a New Inflation-hedge
In these highly unstable years of COVID-19 quantitative easing, explosives in the markets as well as government populism as well as negative interest rates, Brexit and alarming inflation warnings the gold market was anticipated to go up in value, but it hasn’t changed much. It’s approximately the same value it did in 2012. In contrast from 2012, Bitcoin is gone from having a value of less than $1 to greater than $40,000.
It could be that the money that used to flow into gold during periods of turmoil is being poured to bitcoin?
The Economist magazine revealed the fact that, in Q2 of 2020 one cryptocurrency, Ethereum cryptocurrency facilitated $2.5 Trillion worth of transactions that was the same as Visa..
We are experiencing an important moment within the evolution of currency. While uncertainty surrounds the future worth in Ether and Bitcoin or Ether but it is certain that these developments will signal the dawn of a new era of money that could be free of government and central banks.