Michael Trigg
The Illusory World Of CryptoCurrency ALTCOIN MAGAZINE

Is it more than funny money? Only time will tell

What good is a currency you cannot use to pay your rent, buy groceries, make car payments or buy insurance? A currency that bounces up and down in value against mainstream currencies such as the US dollar and the Euro on an almost daily basis is not a currency for the average man or woman in the street. The big negative with cryptocurrency can be stated in one word — volatility.

Image Credit: Dmitry Demidko

The premise behind cryptocurrency is very credible — a monetary system that removes banks, financial institutions, and governments from purchases made between two parties. Great in principle, but bad when the value of crypto against mainstream currency plummets. If you are opposed to gambling, then crypto is definitely not for you.

As an example; you agree to buy a used car through an online website. The seller wants to be paid in crypto. Let’s say, two bitcoins. The value of that transaction in US dollars at today’s rate is $14,376.40. (2 x $7,188.25) You agree but for whatever reason, you cannot purchase the bitcoin until the following day. Overnight, the value of bitcoin goes up. Let’s just say that when you wake up the next day, the bitcoin buying rate is now $8,000. Your cost for the $14,376 car is now $16,000. Of course, the opposite could be true. You buy the crypto the next day and its value has dropped. If the seller keeps to the agreement, you buy the car for a lesser price.

I realize this is a very simplistic example but it is a trap for the unwary or those uneducated in the volatility of cryptocurrencies.

The number of blockchain wallet users is estimated to have reached over 40 million at the end of the first half of 2019. That represents an enormous increase from less than 8 million users in the second quarter of 2016. However, this number pales into insignificance when compared to the 1.7 billion people around the globe who use mobile banking payment services. The graph to the left indicates the latest percentage of mobile banking users in the top 15 countries.

Daily fluctuations occur in all major currencies but are so minute they are not noticed in the daily lives of almost everybody. Currencies are traded around the clock, 24 hours a day. Therefore, as banks around the world buy and sell currencies, the value of those currencies remain in fluctuation. The only time it is really bought to the attention of the average person is when they purchase foreign currency prior to an overseas trip or they receive their credit card bill after traveling overseas.

A majority of cryptocurrency is in the hands of an elite. The following are the top 5 bitcoin billionaires.

  • Barry Silbert.
  • Blythe Masters.
  • Dan Morehead.
  • Tyler and Cameron Winklevoss.
  • Michael Novogratz.

The Winklevoss twins, most famous for trying and failing to gain control of Facebook after alleging that Mark Zuckerberg had stolen their idea, saw the value of their cryptocurrency holdings fall by almost a billion dollars in 2018.

With a wallet that held an estimated 120,000 bitcoins, the Winklevosses were arguably more exposed than anyone to market fluctuations.

So how can daily value certainty be achieved in a currency with such volatility? There have been an estimated 2,400 cryptocurrencies introduced since bitcoin first came on the market. Around 400 never achieved trading status. Investment losses in crypto startups are estimated at over $150 million dollars and climbing.

When will cryptocurrency become a currency that can be used to purchase everyday items? Not any time soon it seems. Cryptocurrencies struggle to meet all the rules set down by none other than Aristotle who said: “Money needs to be durable, divisible, convenient, consistent, and have innate value to be considered viable. Money is generally anything accepted as payment for goods and services where the primary uses of money are for exchange, a unit of account, and a store of value”.

Cryptocurrencies require a great deal of work to meet all of Aristotle’s standards as viable long-term currency. Will technology cause cryptocurrency to become mainstream? This remains a question for the future.

Considering cryptocurrencies only exist in cyberspace begs the question: what would be the end result if a worldwide disaster wiped out the networks that house crypto? Remote as the possibility may seem, there is the chance it could happen. So, is this true durability?

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