Why Bitcoin should be regarded as a real currency; and why it shouldn’t

What is a currency?

The answer to this question is more nebulous than might immediately be apparent. Money is money, right?

Wrong.

These days, money is more of a moveable feast than ever. These tokens we call dollars and pounds and shillings and yen have no intrinsic value of their own and are backed – to the extent that they are backed by anything – by the economic output of the entity that produces them. To a degree, this gives us a way to value currencies, and that’s why a given currency will rise or fall on specific economic news.

But the connection is abstract to say the least. And what’s more to the point as far as Bitcoin and other crypto currencies are concerned, in the case of fiat money it’s largely shadowy and unaccountable figures in the central banking industry who get to determine supply. The man in the street has no real control over the value of money, and never will.

To put this into hard context: broadly speaking, property and asset prices across the US and the wider western world have risen exponentially over the past couple of decades. But salaries and wages have not. Why is this? A major factor is that the amount of fiat currency in circulation has been deliberately increased by central banks to counteract problems that have arisen elsewhere in the economic system, such as the crash of 2008.

The rights and wrongs of such intervention are still being debated, but the net effects of such monkeying with economic forces is that up and coming generations of middle class workers are now finding that the standard of living that their parents took for granted is increasingly out of reach. Want to go a layer beneath the culture wars? – what you find is educated middle class people gradually sliding down the income scale, and understandably kicking up a fuss in the best way they can think of, be they inhabitants of wokeistan or MAGAland.

One way to counteract the hidden manipulations of central bankers is to take the matter out of their hands entirely. And this is where bitcoin and other crypto currencies come in. Because they are extremely difficult to manipulate in the way that actual money supply is manipulated, holders of crypto can at least take comfort that the value will not be deliberately inflated away to serve someone else’s purposes.

It will take more time than has already elapsed for crypto to become widespread enough for this factor really to come into play. But we’re getting there. The younger generation is already far more comfortable holding crypto than their counterparts. And regulatory authorities around the world are waking up to this reality.

Where crypto still has to prove itself, though, is in the pricing. Currencies depreciate and can be manipulated. But only in highly exceptional circumstances do they gyrate around as much as crypto does. And as long as this volatility continues, it will remain part of the wild frontier as far as investment is concerned. Indeed, when the volatility ceases it’s possible it will lose some of its appeal to a certain class of investor. But the truth is that a reasonably stable and steady valuation over a long period of time will do more than anything else to establish bitcoin and other cryptos as what they genuinely have the potential to be: established and stable currencies.

Story by ProactiveInvestors