For years, people involved in cryptocurrency have been disregarding criticism. They were convinced that it was only caused by some bad actors and, eventually, those who didn’t jump in would be left behind. Nevertheless, it is now the perfect time to question the validity of a completely decentralized digital form of exchange. It does not possess the characteristics of a currency. It has been a wild speculation as an investment. Moreover, some of the people who are in charge of important mechanisms have shown to be untrustworthy.
To begin with, a currency needs to have certain qualities. It needs to be a store of value, be stable, be a medium of exchange, have liquidity and be portable. Although supporters of cryptocurrency claim that it has all these qualities, it does not. It is even more volatile than the U.S. Dollar. The graph below displays the variation of Bitcoin, Ethereum, and Litecoin in comparison to their values on January 1, 2020.
Another graph displays the variation of the U.S. Dollar. It is deceiving because the scales are different. A huge jump is only a 10-12% increase in value, while a downward spiral of the same magnitude is only a 4% drop. On the other hand, the cryptocurrencies can have hundreds or even thousands of percentage shifts. This means that they lack the stability and the basic store of value characteristic.
Furthermore, they are not widely accepted as a form of payment. You cannot buy groceries or a tool with Bitcoin. Even the digital capabilities of cryptocurrencies are not as impressive as they seem since currencies and money are already tracked and enabled digitally with credit and debit cards or bank deposits.
Therefore, if cryptocurrencies fail as actual currencies, they can only serve as investments. But there is nothing behind them. With equities, you own a share of a company and with bonds, you have a company or government with resources. Cryptocurrency investments have much higher risks since 3 billion dollars were lost in crypto hacks in 2022 and there have been numerous pump-and-dump scams.
To sum up, the concept of cryptocurrency fails to meet the basic characteristics of a currency. It is too volatile and not widely accepted as a form of payment. It is highly risky and has been associated with numerous scams and frauds. All things considered, it is likely that cryptocurrency will not serve a legitimate purpose anytime soon.
