What’s the likelihood of Cryptocurrencies replacing Fiat money?

...and which Crypto's should you be investing in for the future.

5 minute read

Cryptocurrencies caused shock waves within the financial world when Bitcoin arrived in 2009, and since that time they have gained both traction in the markets, and validity in the way in which they are perceived (I have cryptos in my own personal portfolio, and we do at work too). There is no doubt that these products are here to stay, and if you are actively trading in the currency markets then you certainly need to look at the impact these digital currencies are having on fiat money as a whole.

Will Cryptocurrencies Eventually take over and make Fiat Obsolete
Cryptocurrencies are being accepted by more and more stores worldwide, and what once was considered a Millennial way of purchasing your avocado toast, is quickly becoming accepted as the norm.

You should definitely attempt to predict what type of changes you are likely to see in the way in which the current banking system is run, how financial institutions move money internationally, and perhaps the most important aspect; what habitual changes customers might adopt in the way in which they pay for goods and services, and where they store their wealth. The real question is, how much do you trust the machines? If self-learning develops into actual consciousness, will they even give you your coin back? And where will John Connor be when you need him?!


More stores are displaying the sign 'Bitcoin accepted here’, and as an increasing number of consumers gain confidence in cryptocurrencies, the more likely it is they will be used for day-to-day transactions for things like butternut lattes, skinny jeans and potentially your next wrap of cocaine too (didn't this already happen on Silk Road!?). It’s hugely advantageous for businesses to accept payment in this form since they can do so without incurring any costly banking fees. In addition to this, there are no transaction trails which can be accessed by banks, which means it will also be difficult, if not impossible for a business’s tax affairs to monitored.


The dollar is an example of a centralized currency and this means that there is just one entity that can make decisions about that currency, for example, the decision to print more dollars is a decision the government can make themselves alone. An example of a decentralized currency is the cryptocurrency Ethereum (ETH); it is made up of a blockchain which is not only timestamped, but the information is stored in such a way that you would have to have access to every computer simultaneously to hack the network - highlighting it as a decentralized system.


It is important to use the dollar example as it is currently the defacto world currency, which is to say that it is the global currency. It upholds this status because of the fact that the largest majority of global bank reserves are held in dollars, and many countries peg their currency to the dollar, effectively making it the modern-day gold standard. Countries such as China, Japan and Brazil keep their currencies pegged to the dollar, or at least low against the dollar, to give themselves a competitive edge when exporting to the US. They do this by purchasing treasury securities and taking ownership of US debt. In addition, oil exporting nations have to peg their currency to the dollar because oil is sold in dollars, and it would be far too risky to adopt any alternative approach.

"If cryptocurrencies become more commonplace, then it would be logical to expect global currencies, and especially the dollar, to fall in value. And with less dollars in circulation governments will be less able to influence the economy via quantitative easing and adjusting inflation rates (what a travesty, eh?!)."

This renders images of a dystopian future with people using credits (Bitcoins and alike) to pay for their replacement ink cartridges, soy sauce and other non-essential goods. Whilst there are decentralized cryptocurrencies such as Ethereum and Bitcoin (BTC), there are others which consist of a centralized blockchain; probably the main example would be Ripple (XRP). Ripple is a frictionless payment protocol which can be used to send money globally for just a fraction of the cost that conventional banking methods would incur. Possibly its main advantage is that instead of international transactions taking 3+ days to process, payments can be settled in just 3-4 seconds. Big banks and organizations such as Santander, American Express and Deloitte are already testing out Ripple and you can be sure it won’t be long before this method becomes commonplace.


At the moment the banking institutions are very secure in the knowledge that the sheeple need somewhere to live, and they provide lending in the form of mortgages which enable said sheeple to buy a house. The further the balance shifts, and the more companies and organizations begin to accept cryptocurrencies as payment, the less control the banks and governments will have over the economy (let us pause, rejoice, and sing Hallelujah). It may appear a far-fetched notion, but no more-so than the changes someone born, in let’s say 1960, has witnessed throughout their lifetime.


The foreign exchange markets have a long way to go before they are nullified completely; they will most probably take lots of small hits as digital currencies gain momentum. One thing is for sure, whatever the fate of fiat money in the foreign exchange markets, and products such as Bitcoin in cryptocurrency markets, there will be huge financial opportunities in these areas over the next decade which traders (ie. you) should be modeling and forecasting right now in order to realize the maximum potential of these offerings and be ahead of the curve.


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