Why cryptocurrencies are unlikely to go away.
Last month we had a heavy rebalance. Selling stocks in one currency, buying bonds in another, and waiting for the cash to settle, it is an entirely horrible process. Before the Euro came, it was even worse. For those of you who reminisce about the Italian Lira, you will also remember checking the decimal places several times before selling something denominated in billions to buy something that is, well, not. In any event, I hate currencies, the costs, the time, the hassle, and most of all the risk of getting it wrong.
Then came quantitative easing, and whatever issues we had with the foreign exchange markets gave way for the biggest mountain of debt the world had ever seen. Never mind the logic of the whole thing, and kudos to anyone who can explain who is ever going to pay it all back. The point is, it is hard to trust the government’s grip on the situation, or anyone else for that matter, as most of what we are now doing has no precedent.
Little wonder then, that the world looked for alternatives to an expensive banking system, archaic payment models and indeterminate public policy. Welcome Bitcoin, the answer to our prayers, the solution to all of our problems, and the only thing we should ever own. Just kidding of course, but you do have to like the concept of a global currency, the instant availability of funds, and the sheer speed in which transactions can be completed.
So why the bad press? Nothing polarises people more than a discussion of decentralised finance, and Bitcoin is definitely the new marmite. On one hand, we have the uber enthusiasts who tend to be on a different spectrum and on the other you have the late adapters who just recently learned how to set up a WhatsApp group. In the middle, there are the people who either have FOMO (Fear Of Missing Out), or who are still piling into government bonds yielding nothing. In other words, Bitcoin remains very misunderstood.
Is it a currency, is it a ponzi scheme, is it all dreamt up by Russian hackers and isn’t it the most widely used way of payment in the underworld? Actually no, and the US Dollar remains the currency of choice for all your money laundering needs, but that is another discussion. The thing is, it does not matter what Bitcoin or an NFT is, and who knows how blockchain works anyway. What matters is that there is now close to $2 trillion invested in cryptocurrencies and daily trading volumes are higher than in many stock markets.
Clearly, the governments don’t like it. They lose control. Central banks are also not big fans, as currencies are normally used to manipulate the economy. So, can they regulate it, tax it, or make laws and prevent us from using it? Sure, and they are trying, but then again, the whole concept of decentralisation means that no one can control everything. To make Bitcoin disappear, every country on earth would have to agree to the same rules. Until that happens and there is peace on earth, it is easy to see why the price continues to go higher.