Fiat Money vs. Cryptocurrency

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.

 

Cryptocurrency Headed Up. Are You In?

Confession. I’m a tech guy and financial guy. I started my career as a manufacturing/mechanical engineer, then in 2001 switched careers to a internet-website-tech-business entrepreneurial role eventually becoming CIO then COO of a $100+ million business. Cryptocurrencies starting spinning up in 2009 with Bitcoin, and I missed it. Fortunately, it’s not quite done yet.

With every new industry innovation there is the cutting edge (bleeding edge as some call it), then come the early adopters, then come the late adopters, then come the laggards. So where are we with cryptocurrency? We’re moving from the cutting edge into the early adopters phase. How do I know that? Simple. More press. More adoption. More use cases. More money. For example:

  1. Banks have started testing. The banks are late to the game, but they will catch up fast. If they don’t, they will be obsolete, and they will be gone…or at least lose a huge chunk of business.
  2. Corporate CEOs are beginning to back it.
  3. Use cases are expanding

I could go on like this for pages and pages, but you need to look it up yourself. Crypto Coin News is a great source.

So back to ARE YOU IN? Yes, we missed the big money and opportunity during the cutting edge, but we also avoided the risk that any new industry innovation brings. I’m okay with that. Now however, we are in early adoption phase. Returns will probably be less, but still good. Risk is lower…the proof of concepts are done, the use cases are growing, and adoption is growing. A great opportunity, with less risk…but still risk.

The question you face now is will you be an early adopter and make money, or will you be a late adopter and laggard who just uses cryptocurrency to purchase things?

People Say Bad Things About Crypto

Smart people have been saying bad things about crypto since 2009. It’s going away. It’s going to fail. It’s a ponzi scheme. It’s not backed by anything. Let me answer these things for you in sequence.

  1. It’s going away. It’s going to fail. It’s a going away. It’s a bubble.
    People who don’t get it, say it. So far, many of the naysayers have changed their tunes. A few examples of people who have changed their tunes.

  2. It’s a ponzi scheme. It isn’t backed by anything.
    • This one makes me laugh a bit. Pull a dollar out of your pocket. Now look at it and ask yourself, what gives that value? You’re answer should be “you.” You believe that dollar has value so it does. Along with you billions of other people believe that dollar has value, which is what makes it valuable.
    • Let’s dive a little deeper into economics. In the 1970s, the United States abandoned the gold standard. That’s right, your dollar’s value is not tied to gold. While you can buy gold with your dollar, as long as someone will give it to you, you can’t get gold from the government.

      Also in 1970s, the United States struck a deal with the middle east to price oil in dollars. All oil in the world from 1970s until this year, 2018 was bought and sold in US dollars. This made the dollar the global currency. Countries bought and sold goods in US dollars because it was tied to gold. However, that is about to change.

      What most people don’t know is that China, Russia and a few other countries are tired of the Western elite bankers “BS” and strong arm economic tactics (i.e. sanctions). China, Russia and others have been accumulating gold with the intent of breaking the Petro-dollar. Beginning in 2018, China will open their own oil trading exchanges based on the Chinese Yuan. The Yuan will be tied to gold. Russia and China are the first two countries to begin international trade on this new financial system. Gone are the days of the US sanctioning Russia because Russia isn’t following the Western “agenda”. I think this is a good thing since the west has essentially been starting wars for its own economic benefit. I.e. Iraq war, Libyan war, Syrian war, and the recent Turkish coup attempt. Note that Russia stepped in to stop the Western agenda in Syria.

      Now that you know, China and Russia are valuing their countries money against gold. Why does this matter?

    • The United States and Western Central Banks (run by the central bankers, Rothchilds, etc.), have been printing money and the people and government of America have been accruing massive amounts of debt. As the new Yuan financial standard comes online, the western fiat monies (tied to nothing), will begin to fail. This is much sooner than you might think. Yes, a financial collapse is coming. When? Sooner than you think.
    • Our government is roughly $20 trillion in debt, depending on who you talk to. However, when the numbers get that large, can anyone truly be right? So I ask you again. People believe our money has value because it is backed by our government. However, our government is bankrupt. The pin just hasn’t popped the balloon yet. It’s coming. Once that happens, all perceived value of the US dollar will disappear. The system will be dead and then we will have to rebuild.
    • I said all of that for this purpose. What is the value of the dollar? Perception. What is the value of cryptocurrency? Perception? What is the value of gold and silver? Perception. We as a people ascribe value to things. We determine the value. When enough people perceive something has value, it becomes value. When enough people want something, it has value.

      Cryptocurrency is growing in value right now because people perceive it has value. In truth, cryptocurrency is as valuable as gold because the people believe it to have value. For example, 1 bitcoin is priced around $10,000. 1 ounce of gold is priced around $1,300. Essentially, 1 bitcoin is worth 8 ounces of gold.

In my opinion, it is we the people that give value to anything whether it be gold, silver, fiat currency like dollars, or cryptocurrency. However there is one very big difference between crypto currency and the dollar. Central Banks and the government control the value of the dollar. The people control the value of cryptocurrency. Personally, I’m much more comfortable with people controlling the value of their currency. However, Governments and the Central Bankers will not give up that power easily.

Volatility of cryptocurrency will eventually settle down as we move out of the early adopters phase and into mass adoption. Stay tuned. It’s guaranteed to be an interesting ride.