|
A currency is two things: a store of value and a medium of exchange. If there is high inflation, the store of value function is very limited (temporally). If the currency isn’t widely accepted for transactions, it fails as a medium of exchange.
So are crypto-currencies really good at being currencies?
To decide, you need to evaluate both supply and demand dynamics for the currency (too much supply/production will result in inflation, or currency devaluation, insufficient demand for the currency will have the same effect on its value), and the ability to transact with it. Will governments allow it or ban it? Is it secure from interference, hacking, etc?
Since all national currencies are manipulated by government (whether officially pegged to another, revalued, or inflated), there is value risk in any of them. The USD has been the reserve currency for several decades, but that is likely to change in my lifetime (prediction: Yuan). Will crypto currencies face similar valuation/manipulation risk? Yet to be seen.
To me the value in them today is the ability to transact where tracing is not desired by both parties to the transaction, and to hold an asset that is believed to be untraceable by government. However, if you’re a prepper, you have to think the electronic infrastructure these currencies rely on may not survive whatever you’re prepping for. Similarly, their “darkness” may not last, certainly as they are converted to traditional currencies, so tax avoidance may not work.
This is a developing area of finance and could well become mainstream (but which coin/s?). Could also be destroyed by government actions. For me, play money only (and I’m not in any crypto today, since I really don’t want to educate myself enough to play and I’m not a trader/speculator).
|