Are Cryptos Fiction, or the Future?

Bitcoin up, bitcoin down.

After hitting lows at the beginning of April, Bitcoin seems to be slowly stabilizing at about US$9,000.

Things have been much quieter this year in regards to cryptos after there has been some tightening in regulation around the world and some of the tech giants have banned advertising.

But, I don’t think this means cryptos are dead.

Things may have slowed down, but larger players are still looking to get in.

Thomson Reuters recently surveyed over 400 clients across all of Thomson Reuters trading solutions. They found that 20% of the financial firms surveyed were considering trading cryptocurrencies over the next 3 to 12 months.

As Neill Penney, co-head of Trading told Thomson Reuters:

Cryptocurrency is still a relatively small part of the trading market, but this survey indicates this niche segment is starting to enter the mainstream of the financial services industry.  This is a major change from a year ago.

We could be seeing an influx of institutional money coming into this space in the next year.

Government Imposed Cryptocurrency

Last week, in this article, we asked what you thought about cryptos and the blockchain technology. Do you think blockchain technology is the future? Or do you think it is a bubble that will crash and burn?

We got some great responses from the readers. I thought I would share some of them with you.

Here is what one reader wrote:

Hi Selva,

‘I believe blockchain technology has a future, but I’m sceptical about current cryptocurrencies like bitcoin. What is stopping governments from banning all cryptocurrencies and creating their own, let’s call it govcoin. You get paid in govcoin and all goods and services are exchanged using govcoin. If the government also bans cash then won’t this reduce and maybe eliminate the black market economy? The ATO could also potentially keep track of all your transactions and reduce incidences of people/businesses avoiding tax.

This is a concern I share too. That is, that cryptos could take us a step closer to governments creating their own centralised currencies and banning alternatives like cash.

Going cashless will make it much easier to impose unconventional monetary policies like negative interest rates. It would also allow governments to enforce restrictions on your money.

But, a government imposed crytptocurrency would be centralised, which would be quite different from cryptocurrencies based on the blockchain.

And while some governments may be looking at banning cryptos, it is a good sign that other governments, like Malta, are embracing them.

Are there too many cryptocurrencies?

Another reader wrote:

Sam Volkering comments you quoted are stating don’t relate to dollars but look at the bigger picture of building an alternative financial system.

‘Bitcoin (or any other cryptocurrency) is related to a dollar value as we know and if we wish to profit from any rises we need to take and convert back to a legal tender currency of choice.

‘There are approximately 180 recognised legal tender currencies in the world yet over 1200 cryptocurrencies and growing. If crypto currencies become part of our day-to-day trading shops, retailers, businesses will eventually have to decide on which one. Do I pay for a cup of coffee using the $8000-$9000 Bitcoin or the far more economical Ripple OR do businesses have to offer all cryptos and update the coffee price every couple of minutes due to the massive price fluctuations and sometimes obscenely high transaction fees?

‘Blockchain technology is the value behind the cryptocurrencies and yet everyone seems to know the code logic behind in order for data, financials, sharing of information to remain private and yet available. As written everywhere this is the main advantage of a new world system it seems but as long one can code Blockchain let’s make our own cryptocurrency. If blockchain is the main reform then why don’t we just keep the old fiat money in place but align blockchain to each world legal tender currency.

‘If Blockchain technology is specially aligned to cryptocurrencies should there not be just one cryptocurrency called blockchain (aka bitcoin)? Are all the rest are just fake, illegal or a scam?

‘If I buy bitcoin is it more like share trading that the more people want, so the share price goes up as opposed to Ethereum, Monero, Ripple etc………..If I want shares in Commonwealth Bank – I have to look at the CBA share price, link to whatever currency (fiat or crypto) or CBA align themselves with a cryptocurrency or just makes their own, somehow purchase that particular crypto, then buy the CBA share. Not too sure how this makes our lives easier. I think I will keep reading and see how the world develops, unfortunately my conservative outlook will mean I will not be a millionaire or is billionaire now and look back and maybe regret another missed profit opportunity.

This reader raises some valid points.

The idea behind the crypto economy is that you will not want to convert them back to fiat currencies to make a profit, but that they will be used in the crypto economy.

Yet there are challenges. With over 1,500 cryptocurrencies, how do we price things? Is there a system that will allow us to switch seamlessly from one crypto to another? Should there be one cryptocurrency? Is the crypto economy the future, or fiction?

The truth is that the new crypto economy raises a lot of questions. That’s why, as you read this, I will be attending the Blockchain Economy World Tour conference in Sydney today.

Stay tuned for some insights into the conference.

Thank you to everyone that has written in, and thanks for reading Markets and Money.

Best,

Selva Freigedo,
Editor, Markets & Money


Selva Freigedo is an analyst with a background in financial economics. Born and raised in Argentina, she has also lived in Brazil, the US and Spain. She has seen economic troubles firsthand, from economic booms to collapses and the ravaging effects of hyperinflation, high unemployment, deposit freezes and debt default. Selva now writes from her vantage point here in Australia. She is lead Editor at the daily e-letter Markets & Money. And every week, she goes through each report and research note produced by our global network of trusted advisors to find the best investment opportunities for you in Australia and overseas. She packages these opportunities for you in Global Investor.


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