Cryptocurrencies Are a Bridge to The Future – NOT The Future!
Early investors in Bitcoin, the first of the major Cryptocurrencies – at least those who held their nerve through some crazy price gyrations – have made an absolute fortune. And the gains have certainly extended to more recent convertees.
While so many are laughing all the way to the crypto bank, there have always been naysayers. I admit that I have been one, but hear me out. I can see and understand the lure, even while knowing how, although certainly not when, this phase of the inevitable conversion away from traditional currency-based money ends.
Before discussing where we’re heading – where we must head and every government will ensure we head – just a little more about why the crypto boom still shows no sign of ending. And also, a quick word of warning regarding some shorter-term caution.
Short-Term Pricing Threat
First the one-word warning: RUSSIA!
Russia is estimated to hold 12% of all cryptocurrency. Despite the ruble crumbling, Russia is believed to be buying more crypto, which has fueled the current major surge in prices. This is despite the simultaneous collapse in the price of the ruble, meaning that crypto prices have increased far more steeply for Russia than for other countries. But what happens when Russia needs money and can’t get any the traditional way? It sells crypto! And then what happens to the price? (In case you haven’t worked it out, it will tumble quite dramatically!)
A blip, I’m sure – at least in the short to medium term. But that market will not be for the faint-hearted!
Medium Term Continued Bullishness
With the aid of the modern-day gold rush that is the NFT market, Ethereum is going gangbusters. And it’s not the only one!
For those who don’t yet know this, the reason for Bitcoin’s outrageous price increases over the years is its scarcity. Despite not actually being backed by anything – the thing most skeptics point to as why it must inevitably crash and burn – the brilliant idea to cap its numbers created a scarcity. And nothing fuels price increases like price increases! (No, I didn’t get stuck between two thoughts there!)
Until there is a reason for confidence to reverse itself, bull markets sustain themselves beyond logic or rational thought. But as with all bull markets, the closer you come in to the top, the more you lose in a correction.
Talking Of Market Corrections
Cryptocurrencies saw a large correction just before seeing an even bigger uptick. If anyone who is in that market would care to comment on their thoughts during that short-lived tumult, I’m sure every reader would be grateful! So please comment, below.
The fact that cryptocurrencies don’t have the backing of any government will always make their fluctuations greater and require investors to have even steelier nerves than those who dabble in the stock market.
And Why This Too Shall Pass (Someday)
Sci-fi readers will be quite familiar with the concept of credits. They might have different names in different books and movies, but the concept is always the same – a cash-free, non-sovereign (as in not tied to a single country) form of electronic payment.
Although I’ve not seen an in-depth description of how these are supposed to have evolved, it’s altogether logical. And actually, the advent of crypto clearly brings the timeline for credits being used to the foreseeable future, rather than who knows when or even which century! This is for two clear reasons:
- The mechanism by which credits will one day be used didn’t exist until Blockchain
- Cryptocurrencies cut into bank domination of payments. More importantly, they cut into government control of the units by which their economies function.
Ultimately, banking is destined to change beyond current day recognition. Governments can control their exchequer (treasuries) with or without banks as we now know them. But they would lose control of all – or a significant percentage of – monetary control if payment systems were all independent and decentralized. Simply, that can’t happen! It won’t be allowed to!
Exactly how international governments will eventually agree on the governance of non-sovereign credits is not something I will try to guess. Certainly, they would prefer not to have to do anything of the kind. But the popularity and certain continued move towards cryptocurrencies has forced their hand. They will need to talk and hash out a plan for the future, as the alternative – the loss of control of their economies – is not something that any government can countenance.
Might a temporary bridge between crypto and international credits be blockchain-based dollars, euros, yen, pounds, etc.?Cryptocurrencies cut into government control of the units by which their economies functionClick To Tweet
Large-Scale Crime Loves Cryptocurrencies
There is, of course, another aspect to why crypto can’t last forever:
Drug money is undetectable as it moves around the world. Other criminal enterprises are no doubt shifting money in that manner also. Certainly, rogue governments are evading international laws and sanctions by the use of crypto. As I write this in early March 2022 (the 4th, to be precise), we can be sure that Russian Oligarchs are frantically squirreling as much money as they can in undetectable assets.
Ultimately, for all of the good aspects of Blockchain anonymity, it will be altered to allow government control and forensic investigations. I know that removes the currently unbreakable security of the Blockchain, but I have two questions for you regarding that:
- Don’t you absolutely know that armies of hackers and supercomputers are working on cracking the unbreakable?
- Don’t you absolutely know that sooner or later, they will succeed?
The Bottom Line
So my take is, by all means, if you’re brave enough to ride the craziest rollercoaster in the history of investments, put some money into Crypto. Just know, though, that one day it will be gone. And as it is backed by nothing, that is how much it will be worth for the last left in.
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