It goes without saying that we were all left shocked at the rapid growth of cryptocurrency values, specifically during 2017. Bitcoin, for example, was worth a mere $800 in January 2017; growing rapidly by mid-year with a value of $2,000; and then sky-rocketing by December, reaching an all-time high of $17,900.
Never before has the world seen such an exponential growth of a commodity in such a short space of time.This got people talking, asking questions and wondering what the future held for cryptocurrency.
Bitcoin – global giant?
Now we know the world of cryptocurrency is a mysterious one. It’s a volatile space, and there are as many sceptics as there are believers – and most of us are left wondering the truth. There are many questions surrounding what it is, how it works, how it’ll change the financial markets and whether or not we should jump on the bandwagon. The biggest question by far is whether it has the potential to become a leading, global currency.
What the experts say
Our best bet was to listen to what the industry experts had to say, and their views are startling for sure. Firstly, we discovered that most institutions, and professionals alike, regard cryptocurrency as a property rather than a currency. Dr James Canton of the Institute for Global Futures, says “The Internal Revenue Service (IRS), currently treats cryptocurrency as property rather than actual currency. While it can be used for regular transactions, it’s still not something you would use at the supermarket.” He continued to say cryptocurrency is an investment, and selling it “means giving up a discrete digital chunk to someone else”. This tells us that people would be reluctant to exchange their cryptocurrency for mundane goods and services – which is what traditional currency is used for.
However, cryptocurrencies do have the potential to make drastic changes to the way people handle money and perform transactions, in particular. International Monetary Fund managing director, Christine Lagarde, made a significant statement when she said: “Cryptocurrencies could displace central banks and international banking.” We can believe this, especially because crypto is decentralised. It completely cuts out the ‘middlemen’ (banks, regulators and governments), giving full control to the buyers and sellers. This system is highly attractive to investors, who are aware of the great savings that come from peer-to-peer transactions which have zero interference from third parties.
“…it is as good as money”
It’s difficult to say whether or not cryptocurrencies will completely replace traditional currency in the future. At one end of the spectrum, it seems promising, if the comments of Goldman Sachs’ economy expert, Zach Pandl, are anything to go by. He said: “If Bitcoin can facilitate transactions at minimal cost or provide portfolios with better risk-adjusted returns, it is as good as money. In theory, Bitcoin specifically can succeed as a form of money.” But, at the opposite end of the spectrum, this scenario proves challenging. In the last year, there’s been a significant decrease in the number of businesses accepting cryptocurrency as a medium of exchange – which leaves us sceptical as to whether there’ll ever come a day when establishments recognize and accept cryptocurrency in exchange for goods and services.
So, what’s the verdict?
Realistically, if cryptocurrency takes over, traditional currencies will lose value without recourse, and could potentially cause rapid loss of assets for most individuals. New systems would also have to be developed for it to work effectively, and for the world to adapt to the changes. There are a vast number of moving parts involved in a transition as great as this; making it obvious that it’s not something that could happen overnight.
While there’s plenty of money to be made through investing in cryptocurrency – and will remain the case for many years to come; its complete replacement of traditional money is a far-fetched dream for now – but we’re certainly excited to see what the future holds.