Cryptocurrency vs the Current Financial System Which is more evil?
Hello internet friends!
So I’ve had a lot of questions and concerns from friends and family about cryptocurrency with so many scary and dire predictions and proclamations in the MSM.
If you’ve heard the news lately you may think it would be crazy to ever get into cryptcurrency because the news says it’s a dangerous bubble, pyramid scheme, illegal, used to finance criminal activity, used to finance terrorism, is completely anonymous and 200% evil.
While there are definitely some truths to the MSM articles like most issues in life I feel it is with an agenda and not an accurate reflection of the true picture, reality and future of cryptocurrency. A heads up, I am not a financial guy, I am a tech guy. And because I’m a tech guy, I do see some of the ‘issues’ with Bitcoin from a tech stand point. But with that said, I also see the need for Bitcoin/Cryptocurrency, as I view digital money being the next natural step in tech.
To give you an idea of my perspective to be honest when my wife first told me about Bitcoin I said “there is PayPal”, “it will never be anything”, and there will be “lots of fraud and scams”. I was right about the third one at least (1/3) 🙂
The Main Points The Media Makes About Cryptocurrency and How They Fair Against Fiat Currency
- Cryptocurrency facilitates illegal transactions, terrorism, money laundering by being anonymous and without regulation.
- Cryptocurrency is a bubble and pyramid scheme that won’t last.
- Investing in it is too speculative and risky.
- There are lots of scams.
- Coins are worth nothing because they were created from nothing.
- Cryptocurrency can and will be banned.
The reality as I see it in comparison to fiat
- While I am sure it is true crypto has been used for illegal purposes the same can be said of fiat cash ever since the beginning of time. Cash can be used anonymously and is used that way each day. I think this is a moot point since almost anything in the world with legitimate and good purpose can and will be used for illegal activities.
- I do believe crypto will have a serious crash in line with the 1929 Wall Street stock crash or the 2008 financial crisis but that didn’t stop stocks and I believe the same of crypto.
- This is a broad term, there are literally thousands of coins which serve completely different purposes. There is no doubt some have stronger fundamentals and will last while others are truly worthless for various reasons. There is also massive speculation in our traditional financial system, whether the US housing crisis that put people under water, penny stocks and failed stocks, bonds and mutual funds.
- This is absolutely true, there have been a lot of scams in the crypto world, however there are scams with fiat such as fake money, debit/credit card skimming etc.
- This is true, just as it was of fiat money but this depends on the time period. It’s arguable that back when the gold standard existed that fiat had a certain value and was backed by gold, but today the world is freely printing money out of thin air or “nothing”.
- I do believe it will be banned in some countries, primarily what we’ve seen is exchanges getting shut down in China and Korea but it hasn’t stopped cryptocurrency from sky rocketing.
The Universal Truth
While the media does make some valid points, they are really blown out of perspective. Cryptocurrency does have issues, as does fiat but what I suspect this really is about is the fact that our modern banking and financial system is at risk. Since most cryptocurrencies are decentralized, no one person, organization typically has any control over them. You cannot freeze an individual, organization or country’s assets anymore. In times of war, duress or even genocide such as Myanmar it would be possible for the underbanked to use a cryptocurrency such as XLM (Stellar Lumens from the creator of XRP/Ripple) to safe guard your money across borders and against unjust seizure. With cash or wire there would likely be no time to do such a thing if your city is being razed by the Burmese army.
There is significant risk in the future for cryptocurrency’s which really haven’t seen a seriously long, sustained correction. Yes there have been flash crashes and drops of 25% in a day but they usually all come back higher than ever. This is a bull market without question. On that note I’d like to point out that the financial side of the crypto world functions almost entirely like the current financial system.
Take for example the dominant US dollar, it is still one of the most commonly used settlement currencies in the world which is a way it has artificially held value regardless of how the US economy has performed.
In the crypto world I feel Bitcoin/BTC is on top because it is the main currency used on trading exchanges. In fact on most exchanges you have to convert your other coins into BTC usually to buy into other coins. You can place traditional Limit and Stop Market orders as well. In this sense the crypto world has volatility because it’s a fast changing world with new coins, players and buyers/sellers are coming in and out of the market. You can see people taking profits when some coins surge, just as you would with traditional stocks. If the currency or project behind the currency hasn’t changed in a negative way there’s usually no reason to worry or panic. Instead seasoned investors will wait for the pullback to buy more of their favorite coins.
The Final Word
I think the death of cryptocurrency is highly anticipated and overstated. I do agree the weak coins and ICOs will die, but the coins with strong fundamentals will not be going away. Cryptocurrency is here to stay and there’s no way it can be stopped, it can be regulated and this will somewhat shape the future but we’re now in a period where more regular people will not only invest and trade in cryptocurrency but it will be used as commonly as everyday debit and credit, something that obviously banks and government will take issue with. The answer is truly that you can’t fight the market or will of the people, there are solutions and ways for there to be a win-win but the bankers won’t let their market without a fight.