If you thought that crypto was a bubble, then you’re sadly mistaken. As we go deeper into the 2020s, these new forms of exchange are going to start dominating, and traditional currencies will be in retreat.
Why is this happening? How could two random digital currencies be so well-positioned to take over the world?
The reason comes down to scarcity. Think about how much money governments are creating all over the world. Central banks continually flush economies with cash, handing it out to their friends, hoping that they can “stimulate” and get everything back on track.
Their policies, however, have a dark side – the devaluation of money. Every time the government prints money, it makes the average person less well off because their money is worth less. The effects might not show up immediately, but they will do in the fullness of time. And it’s one of the major reasons why people are still having to work so hard. They just can’t get ahead in the current system.
Bitcoin and Dogecoin, however, are different. Unlike fiat money, you can’t just type numbers into a computer and increase your holdings. You actually have to mine them, which limits the supply.
And that’s arguably part of the reason why the value of these currencies is going up so sharply relative to regular dollars. It’s because the demand for the currency is high and the supply is scarce.
Think about the effects that moving over to crypto will have on the economy. For the first time, the government will need to buck it’s ideas up when it comes to deficit spending. If people think that the money in their pockets is going to lose value, they’ll try to swap it for bitcoin and then use that cash to improve their net position.
Some of the best Canadian crypto exchanges are seeing massive increases in trading volumes. Even previously fringe cryptos set up as jokes, like Dogecoin, are seeing their values explode tremendously, thanks to the fact that the whole sector is in a boom.
When you think about why this is happening, it actually makes a lot of sense. During the pandemic and the financial crisis, governments created a lot of money out of thin air to prop up banks. However, a lot of people are now seeing the writing on the wall. They don’t believe that the current monetary system can sustain itself. And so they’re ditching regular currencies and moving their wealth into something safe.
Cryptocurrencies like bitcoin are highly volatile at the moment. But that won’t always be the case. As the asset class matures and people get used to it, it will become as stable as regular money.
On the flip side, cash could go through some convulsions. If crypto becomes the currency of choice, then people will find it hard to put a consistent value on fiat money and it could exit the financial system as a major player entirely, especially if brokers begin trading financial assets in terms of crypto itself.