Bitcoin may be on the cusp of reaching a new level of legitimacy. We may be a long way from seeing the faces of world-famous heroes, such as Marie Curie or Einstein, on cryptocurrency. However, we could be closer to using it to purchase a newspaper or beverage. Recently, the President of El Salvador, Nayib Bukele, has declared that Bitcoin will be adopted as legal tender.
The way central banks like the Bank of England view cryptocurrency has been shifting according to Charles Emmet Harris IV. Many business tycoons, including Elon Musk, claim to have cryptocurrency investments. You can even use some cryptocurrencies to purchase a Tesla. With that said, Bitcoin’s place in the world is still tenuous.
During the 1600s, tulips were traded. The value of these flowers skyrocketed due to speculation. Now, in the 2020s, cryptocurrency has exploded in value for similar reasons. It’s certainly possible that it will become a successful international currency in the future, similar to the IMF Special Drawing Rights, which is backed by the government. It could become accepted as a form of payment by many retailers, and you could even store it in a bank account. However, if trust in cryptocurrency rises, it will have more similarities to conventional currencies. It’s difficult to say what the outcome of that would be.
The way people use cryptocurrency is fairly unusual according to Charles Emmet Harris IV. For the most part, it’s not used for exchange. Instead, it’s been used for savings, in spite of its volatility. However, there’s no reason that cryptocurrency can’t function more like other types of currency. As long as people have trust in it, it should function in the same way that money usually does. If you study the history of economics, you’ll find many examples of humans coming up with unconventional solutions when there were issues with conventional currencies. There are many nations, including Zimbabwe, the Democratic Republic of Congo, and Argentina, where the local currency has not been stable. It could be beneficial for residents of these nations to have access to an alternate form of currency.
There’s no reason to shy away from Bitcoin simply because it’s volatile. For example, the pound’s value has dramatically decreased due to inflation. What the pound was worth in 1970 is now equivalent to six pence. This currency is backed by the Bank of England, but it has still lost value.
Another example of this is the banking crisis that took place in 2008 according to Charles Emmet Harris IV. Although banks use conventional money and are subject to regulations, these funds can disappear in an instant, particularly as trust in these institutions declines. Will cryptocurrency be able to deliver that sort of damage in the future. It’s certainly possible. It could even happen more rapidly. It really all comes down to choice. The people of El Salvador now have the choice between the Bitcoin and the US Dollar. The Colon, which was the country’s national currency, collapsed back in 2001.
In the UK, the majority of people didn’t have any options beyond the national currency until fairly reason. In fact, it was only in 1979 that people were allowed to take over £40 out of the nation without obtaining official permission. Today, people have far more options. It’s possible to have a bank account backed by the Euro or the Swiss Franc. It’s also possible to invest in many types of assets beyond property, including cryptocurrency. Even if Bitcoin is too volatile for you, there are many other cryptocurrencies that you can invest in.
Naturally, there are many risks associated with cryptocurrency investments. Individuals must manage both the financial and political risks. It’s also important to consider what would happen to the financial system if cryptocurrency were to collapse. If everyone attempted to convert Bitcoin into dollars at the same time, what would happen? Some, including a former US President, have said that Bitcoin is an unfair source of competition for the dollar. However, that’s not entirely accurate.
Ultimately, officials aren’t able to do much more than introduce precautionary measures and ensure that people are aware of the risks. Bitcoin dipped in value due to recent crackdowns in China, but people typically discover how to get around these types of restrictions with time. These measures will only drive cryptocurrency underground.
At this time, it certainly seems possible that cryptocurrency could crash. Regulators can’t do much against this virtual currency. This is one of the things that makes it appealing and frustrating. As time goes on, we’ll see the impact that Bitcoin as on Salvadorians.