BY BORDI JAEN
WHEN the cryptocurrency mania was hitting one of its “peaks” last time, every mouth I heard was abuzz with words like “Bitcoin”, “Ethereum”, and “decentralized currency”. Every mind was awash with a future where people used cryptocurrencies and physical currencies like the dollar were things of the past.
My friends who bought (and are still buying) into the craze were astounded to learn that I didn’t buy not even a peso’s worth of the stuff. They tell me I’m missing out on the future of finance. They tell me I’ll regret not buying into it à la FOMO. They tell me I’m a finance boomer!
The crypto evangelists would always start their spiels with how easy, safe and secure cryptocurrencies can be, owing to their utilization of complex encryption features. Some say it makes international and personal transactions easier since one wouldn’t need to convert currencies anymore or that, unlike traditional banks, there are no additional fees and any of that nonsense. It’s quick and immediate! Lastly, cryptocurrencies are a decentralized form of exchange, meaning that there are no intermediaries like central banks regulating it so it’s purely user to user and out of the reach of big government.
Some people are such great believers in it that it’s no longer uncommon to hear stories of entire life savings, mortgaged houses, and college funds going into cryptocurrency in hopes of it becoming a golden egg-laying goose. It’s also certainly increasingly tempting with business giants like Elon Musk enthusiastically supporting it.
However, not everyone is embracing the cryptocurrency trend. These are the people who think that cryptocurrency is just that, a trend; something that people can waste away a few fleeting bucks at best and destroy lives as a bad, one-time big-time investment at worst.
Cryptocurrency has an enemy in investors like Charlie Munger, Warren Buffet’s partner who himself is anti-cryptocurrency. He sums it up beautifully with the remark, “I think I should say modestly that I think the whole damned development is disgusting and contrary to the interests of civilization.”
Such investors espouse the view that cryptocurrency is worthless because it isn’t backed by anything “real” or “tangible” except the anticipation of holders that there will be those who would want to hold it for a higher price than what the holder acquired it for. Like a bloodhound, they smell the scent of a financial bubble wafting through the air.
Another thing that gets investors bearish about it is that unlike the currencies we currently use, it is too volatile. Sure, currencies have moments of crazy fits (Looking at you, Zimbabwe) but I’ve never encountered a currency that has seasonal seizures. Anyone observing cryptocurrencies like Bitcoin can clearly see that.
Not only that. Most currencies also have predictable and observable trends that people can figure out such as the rates the Bangko Setral ng Pilipinas set or market reactions to international happenings. The reason why Bitcoin fluctuations continue to make news (when they suddenly move up or down) is because they are unpredictable and surprising so therefore interesting.
Who has the whole word in their hands: the crypto evangelists who believe that cryptocurrency will take over as oil did from coal or the crypto bears who think that cryptocurrency is just like the beanie baby bubble on steroids?
I believe that this newfangled invention won’t really become embedded into the financial system. Although cryptocurrency certainly is secure and makes international financial transactions a lot easier and hassle-free, those features aren’t enough to make it an integral part of the worldwide financial system as a currency. For starters, hard currency is already making transacting faster with new technology like Gcash as we do here in the Philippines or QR code paying as they do in Beijing wet markets. Isn’t it already convenient?
The problem with cryptocurrencies is that they aren’t being treated as currencies but as speculative assets. A currency must be inherently stable to function properly so I wouldn’t mind paying an extra one or two percent fee if it meant stability over the chaos cryptocurrency has.
The speculative nature of the holders makes cryptocurrencies too volatile to be a medium of transaction. Imagine getting your salary this month only to find that it has suddenly increased or decreased in value by 10-15% in the next! The problem is that the holders seek to make money off it rather than make money of it.
Although, yes, some might say that even the new technologies hard currencies offer can’t stop the woes of the current financial systems like scammers and hackers. They point out the thousands who have their credit card information stolen or find withdrawals in their bank statements that the owners swear they didn’t make.
However, even cryptocurrency cannot excuse the one thing plaguing us homo sapiens since time immemorial: our stupidity and frailty. To them I point the case of the Bitcoin holder who forgot his password and can’t get his hundred million out.
For context, once you input a wrong password one too many times in your bitcoin wallet, it gets locked forever. Cryptocurrency won’t stop people from getting duped in deals by fraudsters and scammers either. Only this time, unlike banks and governments with their policies to safeguard their people from such cases, cryptocurrency transactions can’t be reversed once made. In short, once you’ve sent your money, no genie wish will get it back unless the sender sends it back.
This is one great drawback in the feature of cryptocurrencies having no regulatory body.
In an increasingly globalizing, fast-paced, and competitive world, I can certainly understand why people would want with all their heart for cryptocurrencies to work. People want to make money. People want to do things faster. People want to explore the exciting unknown. However, when we discover new and exciting technologies, it sometimes helps to take a step back and review things.
We must always remember that recklessly moving into the future can be just as harmful as dull-wittedly staying in the past./PN
