By Ehsanul Hoq
600 B.C. Human civilization was just taking shape. The use of fire, iron and wheel made us stronger and smarter. Now, what can be done to make life easier?
In the ancient kingdom of Lydia, people felt the urgency of a portable commodity that can be used to buy and sell things. So they made the world’s first coin out of gold and silver.
For 2600 years, the shape and the form of the currency changed a thousand times. Kings in the past used to mint new coins to become immortal in the history pages. However, the use of paper money was also popular in ancient China which is the most circulated currency in modern times.
In the twenty-first century, the use of currency became more sophisticated. Banks and Financial institutes created complex money-based products and services to grow our economy. Nevertheless, the desire to change the year’s old paper money and coins grew with the rise of the technology. So we are trying to change the traditional currency to the digital currency also known as a cryptocurrency.
What was the reaction of the central banks when the concept of digital currency came into existence? We went through some of the past remarks of the global regulators and would like to share it with you.
“There have been electronic payment systems in existence for over a decade and there have not been attempts to curb them by using counterfeiting legislation”
Blockchains and Bitcoin: Regulatory responses to cryptocurrencies
by Andres Guadamuz and Chris Marsden
After the rise of cryptocurrency, the regulation in the U.S was not welcoming. According to the U.S currency code, only the U.S. dollar is the legal tender that means only the U.S. dollar is allowed as the official currency of the United States. But it has also been seen that officials never tried to stop the digital asset growing for the last decade.
In the European Union, regulators showed more softness regarding the regulation. There was no indication in the past from EU regulators to stop digital coins from operating in the zone.
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What is a digital currency
Digital currency is the electronic form of physical currency we use every day. Digital money came into existence when cryptocurrency was developed a decade ago.
Digital currency is associated with complex terms like blockchain network, mining and digital wallets.
Like any other currency, digital currencies can be traded or exchanged in the market. The price of the currency depends on complex financial engineering rather than years old centralized systems used by the bankers. The different thing about digital currency is that it can be created by a group of people called miners. They are responsible for decoding the complex blockchain transaction and get new digital currency as a reward.
Bitcoin was the first digital currency to get global media attention in 2018
The use of digital wallets is also a great breakthrough for digital currency developers. Digital assets that are mined or traded can be stored in the electronic wallets with private keys for better security.
The number of digital currency users has risen in the last few years making it a trending topic in the finance world. The study showed that millions of wallets are active around the world with strong support for growth in the future.
The current number of unique active users of cryptocurrency wallets is estimated to be between 2.9 million and 5.8 million.
Source: GLOBAL CRYPTOCURRENCY BENCHMARKING STUDY
Why is this the right time to invest?
1. Higher growth
The growth prospect of digital currency is unimaginable. Comparing the number of stock returns and cryptocurrency returns we can suggest a higher growth of the digital currency in the future.
In one study, we found that if you have invested $10,000 in 2016 in S&P 500 the investment would’ve increased to $12,000 after 1.5 years. However, for the same investment in bitcoin, the investment might worth $60,000.
So getting growth as much as 500% is only possible by investing in digital currencies. But there is a hidden factor inside this awesome growth. The digital currency’s past performance was dangerously volatile. The price goes up and down like hellfire. If you don’t have the nerve to stay cool in the roller coaster ride than we can’t say that digital assets are your type of thing.
On the contrary, if you can stop being anxious about the daily market movements, great growth is waiting for you in the future. Already we have reports of young digital asset lovers earning thousands of dollars each month just spending some time learning about the digital currency. In one article, Sebastian Rossi was featured for earning $12,000-$15,000 every month by using automated software to trade digital assets.
2. Global acceptance on the rise
We’ve already seen the reaction of the regulators in the U.S and EU regarding the rise of digital currency. But it is interesting that the day-to-day currency users like retailers, gamblers and traders are also embracing this shift.
Surprisingly, there are cryptocurrency developers now who provide digital currencies for cannabis producers, payment systems, sports lovers, etc.
Global acceptance is so high that many countries, for instance, China, United Arab Emirates and Israel are trying to develop digital assets to create borderless transactions with significantly fewer fees.
On the other hand, the sudden locked down lifestyle due to the COVID-19 pandemic might force the digital currency creators to be more creative. People are getting more used to digital transactions. Several studies showed that digital payments are rising rapidly all over the world. So undoubtedly, contactless payment is our future.
Since technology has improved a lot for the last few years, we can expect that global acceptance of digital currency will rise to a new height in the upcoming years.
3. Predictable monetary policy
The cryptocurrency and blockchain technology came to existence when an unknown inventor Satoshi Nakamoto developed the world’s first digital asset – Bitcoin. But most of the central banks don’t know how to incorporate the complex digital asset technology into their traditional monetary policy.
“There are now growing signs that central banks are trying to figure out how to embrace the blockchain future. What will that mean for the money supply process as well as for monetary policy?”
livemint.com
So it is a challenge for the regulators to force the currencies to act like one we use daily. Generally, we know that the monetary policies created for the fiat currencies are not predictable. Hence, Foreign Exchange traders bid on the monetary policies to gain some profit. According to livemint, “There are now growing signs that central banks are trying to figure out how to embrace the blockchain future. What will that mean for the money supply process as well as for the monetary policy?”
The supply of the digital currency is restricted by the algorithm of the blockchain. As a result, gamblers can’t exploit the market due to the sudden shift in the currency supply. We can say this term as a discretionary monetary policy.
Here are some of the top digital currencies in terms of coin supply in 2020-
| Currency | Market Cap |
|---|---|
| Bitcoin | $179.41 Billion |
| Ethereum | $23.23 Billion |
| Litecoin | $3.03 Billion |
| Binance Coin | $3.17 Billion |
| XRP | $21.59 Billion |
4. Funding the global economy
In the last 30 years, many developing nations like India, Indonesia and Malaysia rose to the ranks due to some changes in the internal policies. Their success has attracted many others to become economically stable in the last few decades.
Many economists are considering the potential of digital currency to provide cheap capital to the poorer nations in the world. So in the future, digital currencies will not only be confined under the regulations of the rich countries but also be used to finance the poorer countries, hence, creating a worldwide reach.
Moreover, the third-world banking system is known as one of the weakest in the world, so we can assume that flow of digital currency in the under-developed nations will replace the traditional banking systems. So the smaller investment now in digital currencies might bring bigger fortunes in the future for you when the digital versions will become prominent globally.
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Final verdict
The world is changing very fast. The tradition we had in the last decade might not be suitable for the future. From clothes to currencies our taste for accepting newer things is evergrowing. The traditional paper-backed money has many loopholes that needed to be addressed very fast to save our economy from the evildoers.
The higher growth scenario we covered surely gives us the notion to start investing in the digital currencies now. It is impossible for the industries like stocks, bonds and commodities to provide a growth such as the digital assets.
The global acceptance of the currency is also a major factor. Most of the powerful global economies aren’t against the rise of the digital currency. They might argue about the overall process of the digital monetary process but they have no intentions to stop the rise of digital currency in the future.
And finally, with a positive vibe inside some of the major central banks despite having a predictable monetary policy and the future possibility of funding the global economy, we think digital currencies will be impacted in the upcoming days. So we, Finance Tomorrow team, highly recommend you to start investing in digital currencies like bitcoin, litecoin and ethereum for a better future.
What do you think? If you have anything more in mind leave us a comment below. We are coming up with more on digital currencies so like, comment, and follow to support our blog.
Next Episode: How digital currency is going to change business transactions?
Ehsanul Hoq
Ehsanul Hoq is an independent financial researcher and freelance content writer/Blogger
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