LAST WEEK, I wrote about El Salvador’s adoption of Bitcoin and what that could mean for the world.
This article will focus on my concerns about Bitcoin as well as its efficacy as an alternative to fiat currencies.
Having said that, it’s important to start out with the nature of fiat money. Currencies are dependent on the societies that use it. Destroy the society and the currency will die with it.
The thing about Bitcoin is that it is dependent on a technologically sophisticated society. Shut down the networks and the WiFi and the electricity, and Bitcoin will not exist.
This is the same argument that goldbugs (people who buy gold as a hedge against financial meltdowns) have with regards to fiat currency. Unlike precious metals, fiat and crypto currency have no intrinsic value other than what society gives them, or in the case of the latter, their network of users. This makes crypto dependent on technology, much the same way fiat is dependent on central banks. Destroy those point of dependencies and it all falls apart.
People who are bullish on crypto will argue that that will not happen, that our technological society is here to stay. My answer to that is, never say never.
Technology is not separate from other spheres of life. The kind of technology we have now, the kind that is sustained by a highly integrated global system and the internet, is not guaranteed to last. Either it will be superceded by a new technological system (one which renders cryptocurrency unnecessary or impractical) or the existing system simply devolves and falls apart.
So although I am bullish on crypto in the short term (short term meaning within this century), I don’t think it’s the kind of thing that can exist forever.
All currencies have their time, existing alongside specific historical periods, and crypto is no different./PN
