The world is still trying to understand the mysterious, interesting, and promising phenomenon that is cryptocurrency.
Even those who have never used any type of money outside of government-backed notes have likely heard the name of the top digital currency currently making waves. Bitcoin has had somewhat of a wild 2017, leading many people to wonder about its true nature.
For some, it’s a new technology and fluctuations will be common, especially considering the monetary unit’s potential to change the way people view finance. For others, it is a dangerous fad whose volatile fluctuations make it too much of a wildcard to really depend on.
But according to Catherine Wood, CEO of ARK Investment Management, Bitcoin is a bigger idea than Apple. This type of green light from such a prominent name in the world of finance may seem curious to many after Bitcoin’s recent slump. But after seeing so much activity this year, the world’s most popular form of crypto may be here to stay.
Bitcoin’s rollercoaster of value could be attributed to many factors. On one hand, many people are still trying to wrap their mind around what exactly makes Bitcoin valuable. The idea that a data point on a hard drive could have legitimate value (or intrinsic value) seems impossible to some. Others have even called it a scam.
To understand more about the value of currencies, one should consider what makes government currencies valuable. Even after the U.S. dollar was untied from hard assets with the removal of the gold standard in the 1970s, it retained its value. This shows that the dollar’s value as a unit of economic exchanges is almost solely related to its universal acceptance.
The dollar gets its value from the millions of individuals and thousands of businesses willing to accept it. Couple this with the fact that regulators can address any slumps in the dollar’s value and alter exchange rates accordingly, and it becomes easier to see how the dollar remains relatively stable when compared to crypto.
But this may not always be the case. The centralized control of government currencies is one of their biggest downfalls in the eyes of many. It becomes easier for the currency supply to get inflated, subsequently lowering the value of the dollar for every holder even if they don’t immediately see the effects.
2017 has also seen many developed nations such as China admit their growing problems related to debt, a characteristic of fiat currency systems. Borrowing and printing money may be a trick that only centralized currencies can utilize, but this isn’t without its drawbacks. What crypto lacks in the ability to gain widespread use through lawful command, it makes up for in its pre-programmed scarcity.
It seems the way individuals view government currency influences their opinions on crypto. Bitcoin may make up for the shortcomings of “real money” as many call it, and having a viable backup option for making economic exchanges could always come in handy.