How The Crypto Market Has Challenged The Monetary System
Have you ever wondered about a society with a medium of exchange not controlled by banks? This was what Mr Satoshi Nakamoto had in mind when he developed Bitcoin. The first cryptocurrency was intended to be an alternative to financial assets for people who have no access to banks.
No Golden Streak
Perhaps you have heard of the old monetary system characterized by the gold standard. Every commodity is measured according to its value in terms of gold. People would buy products in exchange for their amount of gold. In the same way, merchants would accept the gold once they had parted with the merchandise.
Gold coins and bullions were soon replaced by money printed depending on the number of gold reserves. A state can only print as many bills as guaranteed by the gold in the Federal Reserve. It is an excellent mechanism to control the amount of money being circulated in the market.
At least for the United States, the gold standard system is still in the works. Money issued by the rest of the world is being measured against the dollar reserve. It is noteworthy that the dollar has become the dominant currency under the Bretton Woods Agreement.
Unlike typical money, the value of crypto coins is not determined by the dollar. It was only incidental that these coins are now being sold for some dollars on crypto platforms like Bitcoin Motion. Learn more on how to trade with their software. At the end of the day, the determining factor for the value of digital coins would always be market behavior.
The first cryptocurrency was not necessarily created as an investment unit. It was initially intended to be a medium exchange. The very first commercial crypto transaction involves the sale of pizza from Papa John’s. It is not a surprising purchase of America’s top-favorite staple food. That was the first crypto encounter before these virtual coins turned out to be some powerful investment tools.
It is simply paperless
The monetary system has been dependent on cash. It is for this reason that the state has an agency devoted to printing money called the Treasury, aside from the one responsible for overseeing the monetary supply. These two agencies have to work in synchrony to be able to strike a balance in the economy.
Crypto coins have nothing to do with the typical monetary system. While they can be purchased using fiat currency, it is noteworthy that they can primarily be secured through digital mining without having to spend a single centavo with some tips. They are not even branded as financial assets since they have no value outside the crypto market.
However, it was astonishing that the crypto market has managed to draw subscribers over time despite its lack of financial standing. You can find the crypto coins’ investment value of your chosen trading platform reflective of the market’s impeccable trust rating. This is why these assets managed to thrive and endure the test of time.
The rise of the crypto market has posed a challenge to the traditional monetary system. Although it is not likely to phase out fiat currency sooner or later, it has been a tough rival of the mainstream financial market so far. No wonder the Central Bank has proposed to issue digital notes as fiat counterparts.
Uncontrolled by Banks
A financial crisis would wreak havoc from time to time. From the Great Depression to the Great Recession, the state would respond to the situation through monetary policies. It is the reason why fiat currency is subject to the direct control of the government. This way, it could salvage the economy.
Also read: How Fintech Effect on Banking System
The nature of cryptocurrencies is that they are unregulated. Most governments have observed a policy of neutrality toward this digital asset. The only time that it will intervene is when the welfare of its people is affected. Still, it observes a degree of caution in doing so. You might have noticed how states regulated crypto exchanges but not cryptocurrencies. It simply implies the hands-off behavior of authorities.
These are only a few of the implications brought about by cryptocurrencies in the monetary system. There is no doubt that the crypto market has brought opportunities as much as the money market. No wonder it has gained a significant number of followers.