Is Cryptocurrency Just A Speculative Asset Or More?
They have been constant debate and speculations that someday, cryptocurrency or rather, bitcoin will take over fiat some day. While this sounds motivational, in my honest opinion I don’t think it’s possible. Because fiat, no matter how misused it is, and how it can be generated out of thin air, it is widely important in our environment especially our economic ecosystem. Because, fiat is used as a form of metric scale to know the value of something. If fiat could have been replaced by any assets in the world, I think it would have been replaced with the gold asset a long time ago. But gold didn’t replace fiat, even though it is being used to back fiat, just to show you how important fiat is to the society. If gold was to replace fiat, what would it be value for? Because gold is valued in fiat, when you eliminate the fiat, how do you value gold? What will the wold value metric range be like?
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Today we are in the internet age, and we have internet money now which is cryptocurrency but most importantly bitcoin is the most valued and the most popular. We are thinking that one day bitcoin will take over fiat some day too, but just like gold, bitcoin is a speculative asset. This is because, when bought it is being speculated to increase in price over time. We have seen the price of bitcoin rise from $3,000 to $61k and down to $17k and now at $26k. You can see how dollar is the unit of measurement and a metric unit to value it. Just like gold, it is the digital gold, but it can be used as an exchange means. When you want to buy a car and you have bitcoin in your wallet, lets say you have 1 BTC, you walk to a car shop and request for a car and the car is worth $15k, if the seller accepts bitcoin as a means of payment, they will have to ask you to pay $15k worth of bitcoin, which involves some calculations. Because, where is the value in BTC and the car if it is not measured in a unified metric system which is fiat.
Now in this aspect bitcoin has been used as a means of exchange giving it a currency feature while it is a speculative asset. Because it is a speculative asset, the car seller won’t want to leave the money in bitcoin, he would rather convert it to fiat, or a stable coin, because when something is speculative it is expected to increase or decrease, and having your business tied to a speculative asset just put your money at a higher risk.
Posted Using LeoFinance Alpha