In a headline today that most definitely caught my eye, Forbes, a mainstream publication, allowed an article to be written about cryptocurrency. It is definitely not the first time, but the contents are definitely intriguing and a first. The questions mentioned in the article are definitely something you would see in the alternative media, but not in the mainstream. This article from Forbes goes even farther than just talking about cryptocurrency, as it mentions “Why Cryptocurrencies Could Push The Dollar From The World Reserve Currency Status.” It’s a pretty interesting headline to an article, and the question seems likely to occur in some form sooner, rather than later. If one just looks at the market capitalization for the cryptocurrencies in 1 year, this seems much more likely. Roughly 1 year ago, the total market capitalization for cryptocurrencies was around $13 billion. Today, the total market capitalization hit roughly $295 billion. With Bitcoin at around $9,000, Ethereum at $460, and Litecoin at $85, it shows that the stampede is coming.
Faith in fiat currencies continues to erode, and the amount of borrowed time for politicians is running short. The amount of political discourse and uncertainty over the state of the globe continues to drive capital away from government agencies. People do not wish to be ruled by their money in ways that enslave us all. Liberty and freedom are what humans desire – not enslavement. Many people are hopeful that cryptocurrencies can open up the door to leveling the playing field with the 1%. I am hopeful that this is the case, but nothing is for sure yet. As an economics graduate and someone with an inquisitive mind, I ponder the asset allocation conundrum facing people today. The pessimists, including myself, argue that we are overbought in the stock market and could have a massive correction. It’s hard to fathom a stock market correction with central banks keeping markets propped up and hyperinflating the stock market. The question that is popping up in my head is as follows: were cryptos created as another asset class to gather excess currency units on purpose? The trillions of dollars that were printed need to go somewhere, and we know the majority of them sit in the stock market, real estate, and bonds. In the Austrian school of thought, when governments get into exorbitant levels of debt, they print more money to pay the debt. Money then flows into consumer goods, leading to food inflation. What if cryptocurrencies were created to sop up currencies in order to keep the debt-based model going and stabilize prices? Another asset class could do that, as it requires no physical commodity to be moved around. This could help explain the meteoric rise of crypto as fiat hyperinflates around us. This is just a theory/thought to keep the conversation well-rounded.
Cheers,
Colin Bennett