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The Future of Cryptocurrencies

the future of cryptocurrencies

Does the future of cryptocurrencies belong to the small circle or the masses? Can cryptocurrencies really replace existing fiat currencies?

Inflation

One of the key points of modern fiat currencies is moderate “inflation“.

If the total amount of money remains the same, but the velocity of circulation decreases, there will be a shortage in some areas. At this time, the market will circulate the recognized second currency, and even barter will occur.

This would erode the market value of fiat currencies and central banks would lose control of the currency.

Therefore, when the speed of circulation decreases, it is necessary to print more money. Also, increase the liquidity of currency through fiscal stimulus to stabilize the currency market of the entire society.

Once the economy of many countries is in a downward channel, they will also stimulate the economy and consumption. The way is printing legal currency, the so-called currency “water injection”.

Therefore, a moderate over-issue of currency will stimulate people’s consumption. Such as investing in stocks, which in turn allows listed companies to obtain more funds in the market for development. It also drives employment and increasing residents’ income, forming a virtuous circle.

However, cryptocurrencies are severely restricted compared with the “at any time increase” of the issuance of currency by governments. After all, cryptocurrencies require “mining,” which consumes a lot of energy and other costs, making incremental gains very limited.

This also means that cryptocurrencies cannot have the same scale and flexibility as fiat currencies. It can’ t and achieve moderate “inflation” as needed, which does not conform to the issuance and circulation logic of fiat currencies of various governments.

Decentralization

Cryptocurrencies are decentralized products. There is a mutual substitution relationship within cryptocurrencies. Users can choose any one. The legal tender must be unique and recognized by all citizens. In this regard, the multi-supplier characteristics of cryptocurrencies are also inconsistent with the essence of a single supply entity of fiat currency.

From the above two points, cannot replace fiat currency, and the future of cryptocurrencies belongs to small circles rather than the general public. After all, for most people, investing in a certain cryptocurrency may be like speculating in stock futures in the future, but it is never possible to use it as a market payment requirement.

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