We are definitely living in a very interesting time in history on many levels. While the world is itself in a period of turmoil and change throughout the Middle East and Europe, the financial industry is also undergoing significant change. Unlike what is happening overseas, which is somewhat visible to the American public, what is happening in the financial world is much less visible to Americans. I’m talking about cryptocurrencies including Bitcoin, Ethereum, Litecoin and the other 1,500 altcoins (an altcoin is an alternative cryptocurrency to Bitcoin).
While I’ve known about cryptocurrency as far back as 2010, I didn’t take the time to learn about it. As I’ve learned more about the cryptocurrency industry over the past year, I’ve become more fascinated with it and the potential it represents to the financial and commerce world. However, whenever speaking with the vast majority of my associates, I’m reminded how little most people know about cryptocurrency.
When something new like cryptocurrency is introduced, there is a period of denial and ignorance for most individuals. Cryptocurrency is very different from what we already know about silver, gold and fiat currencies like the United States dollar. Because of this “new idea”, it will take time for the majority of people to accept that a different form of currency is not just coming, it has arrived.
The creation of cryptocurrency is not very different from the creation of any other currency in ancient history. The only difference is that it is digital instead of tangible. Once you learn more about the different types of monies used throughout history including beads, coins, silver, gold, paper, and more, it is not as difficult to realize that we’re seeing yet another evolution of the monetary system. One that eliminates a primary problems with fiat currencies, counterfeiting. If you’d like to read up on the history of money, head over to Wikipedia or PBS.org for a lesson.
Now, what about Fiat vs. Cryptocurrency? Since the creation of Bitcoin in 2008/2009, cryptocurrencies have been under attack by established monetary, investing and business leaders. Every year since its inception, “experts” have predicted the demise of Bitcoin and cryptocurrencies roughly 10+ times per year. You might say in the words of Mark Twain, “The rumors of my death have been greatly exaggerated.” Cryptocurrencies have survived repeated assaults against their viability and legitimacy. This isn’t going to stop any time soon, but in the end, a lot of people will be eating crow when it comes to cryptocurrency as a viable financial tool.
While the US dollar is the dominant form of currency in the world today, I think we can all get distracted from the reality that worldwide, government currencies come and go over time. The US dollar will not remain dominant forever. Currencies also go up and down in value based on the current economic situations. For you money nerds out there, you might enjoy looking at the changing value of the dollar historically or versus other currencies. Inflation eats away at the value of fiat currencies like the US dollar.
While some may say that the argument is fiat currency vs. cryptocurrency as the title of this article suggests, the real question is “will cryptocurrencies like bitcoin and others play a role in the financial markets long term?” Don’t be suckered into the argument of fiat currency vs. cryptocurrency. That’s not the real question on whether or not cryptocurrencies will survive long term or make a viable investment asset. Very smart people fall into varying degrees of beliefs on both sides of the question.Only time will prove who is right.
With the emergence of ecommerce, did we see retail stores disappear completely? No. After 20 years, ecommerce finally surpassed the $300 billion mark in 2015. By comparsion, the entire retail segment for the United States stands around $4.7 trillion for 2015. Ecommerce has it’s place in the market, but it hasn’t come close to replacing the entire retail chain. Cryptocurrencies will likely serve a similar role in the financial space for the near future. They won’t replace money entirely anytime soon, but they will fill a very needed role.
Those who believe “cryptocurrencies are here to stay” are investing and making a lot of money. Those who believe “cryptocurrencies are going to fade away” may well find themselves using cryptocurrency to make purchases in the future and like all the other previously missed investing opportunities, they’ll regret missing this one.