BY SADRA ZAKI
It cannot be denied without fail that cryptocurrency is a topic on everyone’s radar and is continuing to make headlines. But before we delve deeper into this intriguing topic, the basic question is, what is a cryptocurrency? Which currencies qualify as a crypto and which do not ? How does it function? Let’s break this down systematically.
Welcome to the Crypto Talk .
What is a Cryptocurrency ?
A cryptocurrency is a digital or virtual currency that works on blockchain technology and is designed to work as a medium of exchange online to buy goods and services and make payments. It was introduced to the world first in 2013 by Satoshi Nakamoto. Cryptocurrency is decentralized and free from any third party intervention which implies that it is not issued by any government or central authority unlike other payment systems that banks and governments are handling. This is the reason why a cryptocurrency transaction never fails.
Origins , Rise & Reign of Bitcoin :
When Cryptocurrency was initially being experimented back in the 1980’s and 90’s it failed to develop . Fast forward to 2008, Bitcoin emerged as the first Cryptocurrency , set to venture into the real world , ready to seize power from the government agencies and central banks. However after a few years of absolute reign, Bitcoin ceased to be the only existing cryptocurrency in 2011, and as of 2021 has strong rival alternative currencies such as Ethereum , Ripple and Litecoin .
Still Enjoying the first mover advantage, Bitcoin is the world’s most popular Cryptocurrency today, with its market cap currently standing at $1.1 trillion.
What’s with the sudden upswing ?
Cryptocurrency has become immensely popular , widely appealing and has garnered huge support from it’s investors . Following are some of the arguments favoring the former :
- The supporters see cryptos as the currency of the future and hence there’s this frenzy race to procure them before they become more valuable.
- Others like the fact that cryptos will remove the power from the central banks since these banks reduce money’s worth due to inflation.
Yet other speculators are in favor of the technology behind crypto being blockchain which is more secure than the traditional payment system.
Is the Grass always greener under Crypto ?
Owing to the long list of pros, attractive returns and ideas that might transform individuals into future millionaires, is the grass always greener on crypto’s side ? In response to that, it brings us to the other side of crypto which should be thoroughly weighed before an investor sets forth into the world of Cryptocurrency.
“For those who see cryptocurrencies such as bitcoin as the currency of the future, it should be noted that a currency needs stability.”
The former’s arguments stating cryptos as the future currency should henceforth keep this in mind that a currency has to gain stability so that the traders can ensure the fair price of goods in the market.
For example, while bitcoin traded at close to $20,000 in December 2017, its value then dropped to as low as about $3,200 a year later. By December 2020, it was trading at record levels again. So cryptos are yet to show signs of stabilization .
Bitcoin Versus Gold : A contentious tradeoff
Given digital currency’s meteoric run , bitcoin is often referred to as digital gold. However, bitcoin is seen as a speculative investment and it’s for daring and adventurous investors, willing to risk their everything in the short run. Gold on the other hand , has been described as a ‘safe haven asset’. So would it be fair to say that bitcoin is going to take over the gold market in the times to come?
Let’s look at this tabular analysis :
Here’s what experts have to say :
On one hand prominent Wall Street personality and billionaire Mike Novogratz, has sided with bitcoin.
“Bitcoin is digital gold. It has won that lane. I think it will continue to be adopted and it will take more and more of gold’s market cap,” Novogratz said in an interview to CNBC.
On the other hand, we have economists citing why they’ve chosen to put their trust in gold, thereby defying the above predictions.
“My vote would be for gold because it has thousands of years of a historical record as a store of value, has one-fifth the volatility of bitcoin, and doesn’t face the same competition risk. The day that Queen Elizabeth trades in the five pounds of gold in her crown for crypto is the day I’ll shift course.”
– David Rosenberg of Rosenberg Research, former Chief Economist and Strategist for Merrill Lynch Canada and Merrill Lynch in New York .
Conclusion
While many endorse Cryptocurrency as the future of finance and money , we have many who are vehemently critical of it and the impact mining cryptos has on the environment. On one hand we have passionate investors happy at the prospect of fetching futuristic returns and on the other hand we have critics who see them as mere speculations and not real investments and yet others who have chosen to stay reticent regarding this crypto popularization. Whether or not we invest in cryptos, one thing is for sure, that we are all stakeholders in this universe of Cryptocurrency , with our gazes fixed, avidly waiting for what this lucrative market has in store for us.
ABOUT THE AUTHOR
Sadra Zaki is a freshman at KMC , currently pursuing Economics Honors. She has acquired a reputation for her excellence and reliability in extra curriculum. A dexterous speaker and debater, she has a penchant for writing journals and poetries. She’s an economics and finance enthusiast who’s currently working on broadening her arena of knowledge beyond the syllabi.
Disclaimer: The views expressed in this article are the author’s own and do not necessarily reflect the views of the organization.
FINBUISS 