The Old Financial System Is Dead

financial system bitcoin outweighing dollar

 

The financial system as we once knew it has been turned on its head.

Wallets that were once stuffed to the seams have become progressively lighter. And money that you previously touched and held has moved online, adding to our ever-growing mountain of data.

The first to go was cash, swiftly being replaced by debit cards in a plastic revolution. Then debit cards made way for contactless payment methods.

Now even online payments, a realm occupied solely by the banks, is slowly being taken over by tech giants.

Apple, Google and Facebook have all launched e-commerce payment platforms. And when it comes to the ever-growing popularity of mobile-based transactions, their huge customer bases and state-of-the-art tech capabilities pose a huge threat to banks and their bottom lines.

Although the switch-over might not occur in the short term, ratings agency Standard & Poor’s still considers the tech titans a long-term threat to the banks, admitting, ‘… [That] they are well-placed to potentially disrupt certain aspects of the traditional banking industry value chain.

There’s no doubt that it has been a trying few years for the banks. Particularly in Australia.

The Royal Commission into the banking sector is currently underway. And while we await the results, public trust in the banks is eroding.

With all the crypto and blockchain mania on top of that, people have begun to question whether the banks might soon become a thing of the past.

The real threat to the banks

Of course, whether or not cryptocurrencies are the answer to the banking system’s many flaws remains to be seen.

Especially after newfound doubt emerged this week about crypto stability, in what many are calling the ‘crypto massacre’.

Yesterday, bitcoin dropped 17.9% in only 24 hours. Falling all the way from $20,000 to $12,000 per coin.

Subsequently, all the biggest cryptos fell like dominoes. Ripple, ethereum and litecoin are all down considerably.

The main trigger was the fear of a major crackdown on cryptos by the South Korean government. The Finance Minister said on Wednesday that the government was considering banning cryptos altogether.

It’s a damning move, considering South Korea is one of the biggest markets for crypto trading. And it comes hot on the trail of China’s recent calls for a wider ban on services related to crypto trading.

There’s no cause for panic, though. Cryptos are still alive and kicking. And the attempts by governments to quell the rise of this technology only speaks to the bourgeoning power of this asset class. 

However, in this tumultuous climate of hot debate and rapid price falls, it’s hard to know which cryptos are legitimate.

Indeed, it’s hard to know if any are legitimate.

But what we do know for certain is that the financial sector is in a state of flux. Change is occurring rapidly. And it’s very likely that cryptocurrencies will be a big part of our global financial future.

As Secret Crypto Network editor Sam Volkering argues, when the dust settles, there will only be a select few cryptos left standing. And these surviving cryptos are the ones which you want to invest in now.

Sam lays out which cryptos he believes are set to succeed in his report, which you can access here.

This week in Markets & Money

On Monday, Shae questioned whether the Aussie dollar’s strength was a mirage. In just four weeks, the AUD has risen 3.34%. This upward trend has surprised some, with the cash rate standing on par with US interest rates at 1.50%. Usually this would mean that investors would stash all their cash in the US dollar, as it’s perceived to be a safer currency. But due to Australia’s strong commodity prices, the dollar has experienced a similar boost. However, the commodity boost is seasonal, which means the AUD’s rise  is also temporary. So before you get too bullish on the dollar, you should consider that the rise may already be over.

To read the full story, click here.

On Tuesday, Shae explained why the Aussie stock market is doing surprisingly well. As the RBA has left interest rates unchanged for 17 months now, investors are chasing stocks that will give them the returns they’re after. It has also given the retail industry a sudden boost that many are optimistic about. However, Shae doesn’t buy into the hype. Looking at the sales index for December, retail sales were way down. This suggests that the industry is in decline. And 2018 might just be the year that retail collapses for good.

For more on this story, click here.

On Wednesday, the only interesting thing happening in the markets (other than cryptos) was the shuffling global interest rates. Analysts are predicting that the US Federal Reserve will increase rates three times this year, which could have a huge impact on both the Australian dollar and the Aussie property market. Some argue that the RBA should also lift rates to compete. But Shae argues this would actually have more of a negative effect than a positive one.

To read the full story, click here.

On Thursday, bitcoin fell 17.9% in only 24 hours. This was a huge blow to investors, especially as bitcoin has already dropped over 40% since December. But Shae doesn’t believe this is a sign of a bubble bursting. In fact, she doesn’t believe cryptos are in a bubble at all. The main reason for the most recent ‘crash’ was the South Korean government’s pledge to consider banning cryptocurrencies. And according to Shae, this could be a blessing in disguise. After the ‘weak’ investors drop off, the price should correct, and cryptos should become a more stable investment overall.

For all the details on this story, click here.

On Friday, the Dow Jones proved itself to be strong in the face of market chaos. While the turbulence surrounding cryptos distracted everyone, the Dow was surging higher. Over the course of 2017, the Dow gained a whopping 24.8%. A number that has only continued to rise in 2018.  However, Shae believes that the Dow isn’t a good measure of the US economy. Instead, it’s worth looking at the S&P 500 index. The index can tell you a lot more about the US economy. The insights gleaned from it often run counter to what the mainstream is saying.

To read the full story, click here.

Until next week,

Katie Johnson,

For Markets & Money

Katie Johnson

Katie Johnson

Katherine Johnson, usually going by just ‘Katie’, is a member of Port Phillip Publishing’s editorial team, as well as the Editor of the Saturday edition of Markets & Money.

Katie works with all of your editors to maintain the quality of their research and analysis. In her Saturday Markets & Money articles she specialises in cryptocurrency and technology stories, and brings you a recap of the week from your other Markets and Money editors.

Katie Johnson

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