Why you should not be afraid of Cryptocurrency: All you need to know
Currency of the future
Before the US, there were only five other nations that had ‘reserve currency’ status, dating back to the 15th century, namely Portugal, Spain, Netherlands, France and Britain. On average, their ‘reserve currency’ status lasted for 94 years. The US Dollar is heading for 101 years as reserve currency in 2021. Although a mere average of reserve currencies before the US Dollar does not mean it will be the end of the Fiat currency, but there has been no real rival to be successor until the emergence of cryptocurrency.
Easier and cost-effective transactions
As a business or individual, there are numerous transaction fees to pay. Why? That is exactly what cryptocurrency aims to solve. Paperwork, brokerage fees and commission fees have been mostly abolished with the rise and increasing acceptance of cryptocurrency. Essentially, it removes the middle man. Transactions take place from one to another on the same secure network (if done right). As the transparency of these transactions increase it would sort out the auditing problems that most commercial crypto users have been facing.
Inflation? No worries.
The emergence of the COVID-19 pandemic caused a debt spiral in the US. In response to COVID-19 lockdowns and to combat its potential negative effects on their local economy, US officials were overconfident in their ability to print dollars in unprecedented, record-breaking amounts. Allowing them to run fiscal deficits based on their reserve currency status. In 2021 terms this means that the American population (the consumer of the fiscal spending), having one of the largest GDP per capita figures in the world, is currently living on sovereign debt without similar consequences other countries in similar positions are facing.
The COVID-19 pandemic has made the case for acquiring cryptocurrency much more viable as larger institutions were fearful of central banks around the world following a similar path as the FED and consequently devaluing their currencies. This caused these larger institutions and later on the retail-investor o purchase bitcoin in substantial quantities. As there is a limited supply of the more commonly recognized cryptocurrencies, such as Bitcoin, there is no central bank involved who will be able to manipulate the value of the currency.
Big corporations are also taking it very seriously
Bitcoin is already starting to replace many day-to-day aspects of the US dollar as a medium of exchange. Bitcoin is predominantly being held as an investment, but that is changing as small, medium and large businesses have started to use Bitcoin in international trade, or in countries where the dollar is not accessible, or where the local currency is unstable.
The overlapping characteristic other reserve currencies have faced as they approached the end of their reign was when the rest of the world lost it trust in their ability to pay their bills.
With PayPal allowing users to pay with most mainstream cryptocurrencies, the world is rapidly adjusting to a new global currency. The US dollar became the reserve currency before most of us were born, thus we have never experienced a change of global reserve currencies. One thing is for sure, cryptocurrency is by far one of the fastest growing currencies (as it is more broadly accepted as means of exchange) in history.
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Author: Francois Nel, BCom (US)