Future of Crypto Currencies - Success or Failure?

Crypto Markets and their Potential

The crypto markets are based on blockchain technology which is revolutionary in nature, and it solves some key economic and transactional problems, as well as data security problems, so it is without a doubt a game changer.  Whether or not cryptocurrencies will dominate the marketplace is debatable, because there’s too many of them at this time.

The reality is that despite some real technical problems and difficulties, major cryptocurrencies such as Bitcoin, Litecoin or Ethereum will definitely survive any kind of price bubble. Bitcoin, for example, is not a bubble in any way, because it facilitates a real service, it solves real money problems for many people, such as storing wealth in a safe way, protecting against hyperinflation and sending payments back and forth, at very low cost. Moreover, each Bitcoin costs more than a $1,000 in electricity alone, to produce, so it is by no means a fool’s game, nor is it a bubble. People who view Bitcoin as a bubble, that doesn’t have intrinsic value, are shortsighted people, who also think that software is easy to make, and should be given away for free. But as we all know, software solves key real-life problems, and it can be very expensive.

What Cryptocurrencies Cannot Do

Cryptocurrencies together with the broader blockchain technology will make the world a better place and will help many industries grow, and will also help the global economy grow. Governments, however, will still use fiat currencies, because fiat currencies are the best way to run a country, especially economically strong countries that export many goods.

So currencies such as the Euro and the US dollar or the British pound will always be there, because they are controllable currencies, where governments can control interest rates and other variables, thereby adjusting their economies to the global economic conditions, when they need to. Fixed value currencies cannot be used by developed countries because they offer no control, this is why the gold standard was abandoned after WWII. Because if a currency is always strong, and simply follows the value of gold, it provides no flexibility, it makes exports too expensive, and the economy stagnates.

In simple words, the gold standard is like a car which only has one speed, whereas today’s fiat currencies enable countries to shift various gears, and change speeds, since the global economy is not moving at fixed speed itself. So no matter how strong Bitcoin becomes in the future, and how many problems it solves for individual people, it can never replace national currencies. People who blame government control over money, and fiat currencies don’t understand basic economic problems, they also blame governments for abandoning the gold standard, but next time you argue with such people you can ask them, how on earth could countries such as Great Britain have recovered right after WWII, if they had continued using the gold standard? And how can you have Bitcoin as a national currency, and still have competitive exports right when you need them? That’s the real world.

Any cryptocurrency that solves a specific problem will definitely be successful, there could be more than 20 cryptocurrencies that will be successful. But fiat currencies solve their own, economy-specific problems and they will also be there for a very long time. You can find out more about Cryptomarkets on the Investor Greg blog, in the related articles.