Since digital currencies appeared in 2008, a period that coincides with that of the financial crisis of that time and when a person (or a group of people) under the anonymous name of Satoshi Nakamato, published a scientific article entitled “Bitcoin, a peer-to-peer electronic payment system”, events and developments have been many and significant. The cryptocurrencies themselves have come and gone, from Bitcoin to Litecoin, from Ethereum to ZEC, from DASH , to Monero, NEO, etc. Along with them, the digital platforms in their function have also been developed, they have become a part of the monetary payment system and even investments in the markets. world and the financial world were hit during this period by the economic recession caused by the Covid-19 Pandemic and the consequences and threats of the energy and food crisis, high inflation and “crazy increases prices” as a result of the Russian war in Ukraine. What happened to e-money and bitcoin as a father?
Cryptocurrency as development
The 15 years of life of cryptocurrencies have been associated not only with their transformation from an idea into reality, developing the largest electronic platforms for trading these cryptocurrencies, but also with debates and dilemmas about the role and their future. Are they a development or a hoax and speculation?
Undoubtedly, from the point of view of the form, of the way of using digital currencies in monetary transactions through electronic platforms, they are a product and part of the unimaginable development of digital technology, which has already become a integral part of the “new life” of this century.
What are the innovations brought by the birth, development and use of cryptocurrencies?
From a monetary point of view, a new currency has been introduced into circulation, for payment-transaction and investment purposes, which aims to become an international currency.
But, as we know, the main evolutions of the system and of the international currency are linked to the creation of the international monetary system, that of Bretton Woods (1944). This was the first system used after World War II to control the value of money between different countries, which meant that each country had to have a monetary policy that kept the exchange rate of its currency in a fixed value – more or minus one percent – in gold terms (at US$35 per troy ounce of fine gold, or 0.88867 grams of fine gold per dollar). But as we know, it was the Nixon presidency that brought about the collapse of the Bretton Woods system, officially suspending the conversion of the dollar into gold on August 15, 1971. This ended a key aspect of the Bretton Woods system. . The rest of the system, the adjustable peg, disappeared in March 1973. Although the US dollar continued to be the strongest international currency even after the collapse of this system, the introduction into the money market in 1999 of the common european currency the euro was a historical evolution of the international monetary system. And then, digital currencies after 2008 were seen as a major attempt to move towards an international role as money (although they are still far from this goal).
-From the point of view of the development of legislation and regulatory acts, it is still in its infancy because few countries have undertaken legal acts regulating the activity of these currencies, although many regulatory authorities or the Central Bank have issued more acts to control and be vigilant about this innovation rather than to motivate it.
-From a technological point of view, the digital platforms in rapid evolution allow the ease of their use in a very fast time and the increase of their security guarantees.
-At the same time, this development of the use of crypto-currencies has not only greatly modified the culture, the techniques and the way of working in their use, in particular in transactions, but has revolutionized the financial and monetary culture and enriched the terminology of the monetary world for users and financial markets, analysts of these markets and economists and financiers.
-Finally, the phenomenon of digital currencies and the creation of their market marked a new era in the monetary field (which continues today) accompanied by debates on this phenomenon, what role and what function it will have in the future by relation to the already consolidated and classical role and functions of money. And further:
– What constitutes the heart of the debate is the cover in gold or in any other form by the Central Banks of this currency. And if this evolution is to achieve its full objective, moreover in the context of post-Covid global developments and the war in Ukraine, to become an international currency, should the financial world turn to a New Bretton Woods? What does reality say?
Are cryptocurrencies a fraud?
When early investors ‘rushed’ to invest in cryptocurrencies and started using digital platforms for early payment transfers, it seemed like they had ‘found gold’. Thus Bitcoin, the “heart” of the cryptocurrency, experienced its boom with the expected ups and downs of the market. With the start of the war in Ukraine and the subsequent crisis, it seemed that this currency would be the “magic wand” of salvation from the economic and financial crisis that threatens the world economy and high inflation.
But the disappointment was quick. Not only did this not happen, but on the contrary, the shock of the main cryptocurrencies was very strong. This earthquake, whose circles are constantly widening, has deeply shaken the confidence of investors whose losses are counted in billions of dollars and the number of victims of this phenomenon is becoming shocking. But how did this situation arise? Why do economic analysts already consider this situation too negative? Is it because of the uncertainties carried by these currencies since their creation? Is it because of the attitudes and clashes of multi-billion dollar giants over these coins and their psychological effect? Or the war in Ukraine and the economic, energy and price crisis are to blame, as they hit the big and small investors of these digital currencies? Or all of the above? Let’s check out some of the latest information:
-While the war in Ukraine does not stop and the threat of multiple crises continues to grow, reports from the cryptocurrency markets are quite depressing.
– A few days ago, it was announced that a Bitcoin collapse threatened San Salvador, the first state where this currency was legalized and put into use.
-Another shocking news comes from the world of digital currencies: They manipulated the price of Dogecoin in a “crypto pyramid scheme”: Elon Musk, SpaceX and Tesla are sued for $258 billion for embezzlement in federal court , claiming that Musk had “manipulated” the Dogecoin price via Twitter. The lawsuit alleges that the cryptocurrency Dogecoin, launched in 2013, was an “illegal fraudulent enterprise” driven by promotion and manipulation on Twitter.
-This news comes at a time when the shock in the cryptocurrency markets is intensifying, as evidenced by the fact that Binance, the world’s largest cryptocurrency trading platform, has temporarily suspended payments on Bitcoin and the Bitcoin’s value has fallen more than 10 percent to less than $24,000 apiece, which is the lowest level since December 2020. Market cap has fallen to $430 billion and its dominance has shrunk by 2% overnight.
Meanwhile, billionaire Bill Gate described the cryptocurrency phenomenon as “100% based on the utmost theoretical stupidity”.
Another bombshell statement came from billionaire Warren Buffett, who said he wouldn’t even offer $25 for the entire amount of Bitcoin circulating in the world. “I won’t even buy them for $25, because what could I do with them? Somehow I’ll have to sell them back to you. But with them, you can’t do anything.”
Undoubtedly, these statements are not only a confrontation with the owner of “Amazon” (who is currently sponsoring his digital currency – Amazon) or Elon Musk (already accused of fraudulent cryptocurrency scheme), but they are also a call for vigilance to all investors. , big and small, who have invested and are investing in the cryptocurrency market. And the psychological effect, no doubt, cannot be negligible.
This situation proves that dilemmas and questions about the future of cryptocurrencies are still unresolved. Who will win? Honest technological development or manipulation and deception? Let’s wait and see.
(* Academician, expert in economics, former deputy and minister, Panorama, June 20, 2022)