Cryptocurrencies are a topic that touches many areas; not only finance and investing but technology and even political arenas. Although apolitical in itself, it is the structure behind these cryptocurrencies that make them a much talked about subject amongstĀ political purists from across the political spectrum.Ā This structure can be boiled down to the following; think of cryptocurrencies as a ābig spreadsheetā, and when you āmineā crypto you essentially fill in the spreadsheet, keeping the ledger up to date on who is transferring currency to another party.
It is perhaps this decentralised nature which has contributed to theĀ meteoric rise of cryptocurrency value. Modern investors see the value in having an immutable ledger, meaning that external users or third-parties cannot tamper with previous transactions. This becomes more crucial when you consider the impact thatĀ quantitative easing has had on the economyĀ over the past several decades. Cryptocurrencies, compared to their physical counterparts, are practically immune from quantitative easing as there is a predetermined number of coins in circulation at one time meaning that they are impervious to inflation. This has contributed to more individuals over the years turning to cryptocurrencies as a āsafe-haven assetā in the same way that investors would traditionally turn to gold. In my eyes, I see Bitcoin as better at being Gold than Gold itself, because of its ability to be infinitely divisible into micro units and decimal points of a Bitcoin rather than a single gold coin. It also inherits another important characteristic of Gold which has fuelled its rise in price, it is finite ā there will only ever be 21 million of them in circulation (once all mined). Compare this to standard modern currency, on money printing and inflation consider this:Ā a fifth of all US Dollars were created in 2020, and now in 2021 President Biden is considering a $1.9 Trillion stimulus plan. Indeed, it is this effort by central banks across the globe to print their way out of a pandemic/unstable economy that ā in my opinion ā has led to the exponential price increase in Bitcoin during 2020 rather than any other factor. As long as this continues (which it almost certainly will), faith in fiat currency will wane and interest in āunprintableā cryptocurrencies will only increase.
more on: Decrypting Cryptocurrencies
Blockchain Bubble or Revolution:
