To say that the success of cryptocurrencies is due to distrust of central banks is probably an exaggeration. Many people who invest in crypto do n’t even know what the role of central banks is in the economy. What I do think there is is a general distrust in banking, including central banks, which helps the development of cryptocurrencies.
In my opinion, most of its success is due to it being an idea that sells itself. In addition, it is one of those ideas that appears just at the right time. What can be more attractive than a digital currency in the midst of the digital revolution? And that above is called crypto. I cannot imagine a better chosen name. And the same can be said of Bitcoin : it is a perfect name for this moment and this era.
But it’s not just about the “natural” – or innate – marketing of the idea. It is also the perfect representation of the population’s rejection of banking excesses. Abusive commissions, “trilerismo” in the sale of products, scandals of various kinds, and so on. In addition, it is a rabidly technological idea in a world that adores technology and its myths, just as in other times warriors, merchants or industrial barons were mythologized.
Cryptos are the representation of the population’s rejection of banking excesses
Go ahead, I have nothing against technology geeks and even less against cryptocurrencies. In fact, it is most likely that the day they are adequately supervised and offer the same degree of transfer as other assets, we recommend them. And not only as currencies (for investment or diversification purposes), but because of its, in my opinion, its greatest attraction, which is to be a store of value that protects against the excesses of central banks.
Cryptocurrencies are certainly being the subject of a high level of speculation, another reason why we still do not work with them. But we forget what the volatility of money was in its early days. Or inflation levels. And what we are witnessing is the beginnings of digital money. I see little “chaos” in Bitcoin – digital currency – if we compare it with what Nero did with Roman coins, from which, quietly, he was taking gold from them and replacing it with other things, in order to be able to manufacture more. As all the “central bankers” of antiquity did to finance what their kings will think of.
In fact, now that we talk about how Nero “expanded” the money supply in the Roman Empire, a question arises: at this rate, who can become more dangerous from that perspective? Bitcoin or central banks? The European Central Bank continues to print money , with the excuse of facing a pandemic that has lost a lot of economic effect. And he does it while inflation is rising right under his nose. It is clear that it is no longer about the pandemic, but about cheap financing for politicians in the eurozone.
Exactly the same as those responsible for the public treasury with the kings of antiquity. And what about the Central Bank of Japan, which is in eternal QE mode? The QE, which is a temporary tool for extraordinary situations.Luckily the Federal Reserve seems to be considering reducing banknote production , because if not, we’d better soon have a digital currency that we can recommend alongside gold or the Swiss franc.
Central banks may end up being the greatest allies of Bitcoin or another properly regulated and supervised digital currency (which does not mean depending on central banks). At the moment, most of the large international collective investment institutions do not invest in cryptocurrencies, or do so in a testimonial way, but imagine the day that they are properly supervised and become an alternative to the paper money issued by central banks. Or to their digital currencies, which are the same.
Imagine the effect of an institutional demand of that size on a relatively small asset such as, for example, Bitcoin.
So if central banks don’t want the demand for Bitcoin to skyrocket, they have the solution at home: they have to stop printing money and regain investor confidence. Everyone has understood that they had to fight against the effects of the 2009 financial crisis and then against those of the pandemic. But, as of now, there is no justification to keep making banknotes at this rate, and if they do, investors will prefer cryptocurrencies to paper.