If you're only a little bit familiar with the
monetary system, you'll know that fiat currency
is not sustainable in the long run. The reality is
that it's just a bunch of debt getting funneled
around and more debt is created every day. As
long as fiat currency exists, the debt will exist. If
all the debt would be repaid, there wouldn't be a
single dollar in circulation.
This is probably why you're here on Steemit as
well. You've lost your trust in your local currency
and moved to cryptocurrencies. If you're a good
investor, or just lucky, you could have made good
profit on your savings by putting them in Bitcoin,
Ether, or many other currencies. And you still
can!
However, you can also lose a lot of money if
you're not careful. Over the past few years there
have been multiple Bitcoin "crashes". I remember
my secondary school economics teacher
arrogantly telling me that, after we saw Bitcoin's
first big correction in november 2013, "it had
become clear that Bitcoin wasn't a good
investment anymore." Joke's on him: according
to coinmarketcap.com , today Bitcoin is worth
almost $3,400 USD. That's almost triple of the
all time high at the time.
The state creates artificial value based on force
The most important difference between fiat
currency and cryptocurrencies is that the value
of fiat is determined by force, while crypto gets
it value through voluntary exchange instead of
governmental coercion.
Let's take the Euro as an example. The Euro
was created by the European Central Bank, after
which most member states decided to issue it in
their respective countries. In other words, various
states forced their people to adopt a currency. It
doesn't matter whether you wanted it or not, you
had to use it.
But you can choose to simply not use the
currency, right?
Well, no. The thing is that the state takes money
from its citizens through taxation. Therefore, you
are forced to pay a cut of every transaction you
do to the government in Euros. This is how the
state creates demand for the Euro. It is an
illegitimate demand for Euros. If you prosper, the
state demands that you do your business in their
currency so that they can tax you. This is the
main reason fiat currencies keep their value: the
government forces people to use it, driving up
demand, and thus its value.
Fiat gets its value. Crypto deserves it.
The difference with cryptocurrencies is that their
value is solely determined by supply and
demand. Of course, there are exceptions, but
this is the main trend. This means that crypto is
traded through voluntary exchange. The supply
and demand of cryptocurrencies is genuine and
not likely to be the subject of manipulation
through force.
Therefore, it is unreasonable to say that
cryptocurrencies are in a bubble. The fact that
the price for crypto is so high at the moment, is
not because people are forced to use it. This is
the price that people agree on. Although the
crypto market will probably see various
corrections in the future, this is a healthy
occurrence. It certainly doesn't mean the end of
the crypto world when the price drops: it is
merely a consensus of the people who exercise
the demand for it.
As long as this principle stays, cryptocurrencies
will be more sustainable than fiat currencies in
the long run, regardless of their volatility. Crypto
is the future, so be sure to be one of its first
adopters!
