As much as institutions, risk-averse, or simply sceptical people have downplayed the new digital currency revolution – it still, a decade after coming to public light, remained resilient and now ever so prevalent in our society. Bitcoin now gets a regular mention in daily news and stock market reports. It is also being traded by several established investors and even included by fund managers as (naturally) high-risk portfolio instruments.
We all by now, have heard the old rhetoric of high volatility and use for criminal activity when it comes to Bitcoin and its crypto-family. Billionaires Warren Buffet and Bill Gates were two of the most recent financial ‘institutions’ to weigh-into this by publicly lambasting Bitcoin – with Buffet equating the cryptocurrency to rat poison!
Such views back the ‘rationale’ for crypto’s inability to take over fiat money or become a major form of currency. Be it may, the digital currency, however, does have its unbeatable benefits and functions: ones that are difficult for even the most hardcore anti-crypto audience to ignore.
Here are three functional attributes and trends that the digital revolution has created since coming to the mainstream:
Financial emancipation: Bitcoin and ‘altcoin’ investing have created a new wave of financial investors. These are retired bankers; naturally the millennials – who instinctively jump onboard a new discovery that has creative destruction-like tendencies; and then the plumber, bartender and the average man on the street.
Its ease of access, use and potential to turn a few dollars, euros or local currency into hundreds, thousands or millions more, makes it a high appeal for those who typically would be excluded from owning an investment portfolio.
Based on their returns many have taken to social media (via groups, profiles and communities) to share their success stories. But this is also a reason to heed caution when taking counsel from anyone claiming to be an expert in cryptocurrency investment. It is new and while volatility is not new to trading – it is constantly on a rollercoaster ride making it hard for even seasoned trading experts to predict using traditional market analysis tools.
A recent development termed Hodl Waves attempts to track and predict Bitcoin movements via complex usage history – comparing behavioural patterns of what people do when they have the coins and when they choose to reinvest them.
Cryptocurrencies have nevertheless, got more people thinking about making profits, looking into tax implications and anything financial for that matter! Crypto investors are now constantly planning for their future while matching their ‘block’folio performance to capital gains not only from rival coins but also against traditional (lower yielding) investment instruments such as property, a savings account, mutual funds, hedge fund or retirement annuity.
Blockchain technology has also spurred a new path of careers and industries as more companies globally, for instance, look to acquire the lucrative Crypto exchange license to operate. These cryptocurrency exchanges require people to service clients in various levels: from account managers, technical advisors, software programmers, to customer service agents and the accompanying social media marketers needed to promote the various exchanges and punt the ever-growing hundreds (approx. 800) of individual cryptocurrencies.
Governments as well will benefit from their operations and while there are still discrepancies in most countries about how to tax individuals, fiscal authorities will get a lion’s share of income from taxing these exchanges.
The way money is transferred: we all have undergone the painful stress of waiting for funds to clear so your rent gets paid or waiting to receive money from abroad for an emergency. But the standard “3 to 5 working days” in which most (if not all) banks guarantee for something as simple as an inter-bank transfer is simply not good enough especially when there are public holidays involved. With cryptocurrency the aim is to be not only the most secure form of funds transfer – but the fastest.
Converting cryptocurrency back to fiat money, however, remains the only potential bottleneck as it would require institutions to adopt or directly accept payments in the cryptocurrency to avoid one going through another step to receive goods and services.
Cryptocurrencies nevertheless still cut down transfer time significantly compared to traditional electronic fund transfers of fiat monies – which becomes even more of a logistical quagmire of time wasting and high costs if you must switch currencies before the transfer can be made.
To reiterate, all of this can and be avoided once more and more companies accept payment in one or more types of cryptocurrency. The onus is thus on the creators of the digital coin or token to prove that their digital currency is reliable enough and readily available to be used as a form of legal tender. There are several reports nevertheless of known, well-established financial institutions and companies using currencies like Bitcoin, Ripple, Verge for fund transfers or even direct exchange for services. The New York Stock Exchange (NYSE) this year plans to list Bitcoin (as an EFT) on its bourse and is filing for permission from the SEC regulators.
The third and final point to consider – one that cannot be omitted, is the reduced costs associated with dealing with money you have (hopefully) earned form hard work. Even inheritances are gained because of the toils of the giver’s hard work. So, it wouldn’t be fair for a group of a few companies headed by executives to siphon it from you all in the name of ‘providing you with a service’.
We all pay for Internet use (and the security software associated), for smartphones and computers. We, therefore, have the technology to make transactions ourselves without having to rely on others to charge us for things we can do ourselves. The financial institutions have long preyed on people’s ignorance, obedience and unquestioning trust while they brazenly burn cash dabbling in equally questionable high-risk investments like derivatives and futures.
It is only a matter a time before the banking institutions and big companies get on board to benefit from the high-level encryption and speed provided by digital currency – even if it means creating their own blockchain and not bowing down to the pressures and potential competition that these altcoins pose to their modus operandi.
To conclude, the ‘wait and see’ mantra all that we can exercise when predicting the future of digital currency. But for now, it is a bright one considering the three points mentioned above. There are, however, concerns on how secure the encryption can remain with the advent of quantum computing – which has the potential to make calculations at millions of speeds faster and thus able to crack the toughest data encryption.
Regulation, however, while feared by hardcore decentralization pushers, would be required in some form to keep the prices stable and of course, help manage the daunting task – as with any other form of currency – of keeping cryptocurrency away from criminal exploitation.