The world is facing a major unprecedented economic shock as the pandemic continues crippling the economy. The world is yet to fathom the magnitude and duration of this financial instability. The financial system is under strain. Central banks might be obligated to move towards zero interest rates, pour vast amounts of finances into the financial sector in an attempt to achieve quantitative easing. They might even try helicopter money, but the uncertainty of whether the whole system will stand or collapse is still unsettling. This crisis seems like the ideal opportunity for cryptocurrencies to save the situation. The question is: are the cryptocurrencies up to the challenge?
Most people believe that Bitcoin was created because of the 2008 financial crisis that affected the entire planet. However, according to David Yermack, a professor at N.Y. University, Bitcoin was launched in 2009 after several decades of attempting to invent a digital currency based on a peer-peer system. But, his remark that the timing of its launch may have attracted users.
The surge in the crypto market this week might just confirm that the digital currencies are attracting more users. Several people might just be getting to know cryptocurrencies as an online payment mode now that business has shifted to online platforms. Buyers or Investors, the fact is the crypto market is booming.
The value of a currency depends on faith, if people lose their faith in a particular currency, the natural reaction is to move to an alternative currency that seems more valuable. Value is attached to the most stable currency, which has been the U.S. dollar. The bitcoin price rose as the 2008 crisis deepened, which is similar to what is happening now. Not only is the price of Bitcoin rising but also the price of most of the cryptocurrencies.
Many cryptocurrency supporters have been waiting for such a time to see cryptocurrencies provide the much-anticipated salvation. Despite such belief, the fact is cryptocurrencies might not have the capability to make a difference.
Is it Time Yet?
Cryptocurrency is still facing many problems. The first being security. People risk losing a lot of money because of hackers and frauds. The major problem, however, maybe the lack of people’s knowledge and understanding of cryptocurrencies. By 2019 only 19% of the global population were actively involved with cryptocurrency. The percentage might have increased now, but there is still a long way to go.
“The blockchain symbolizes a shift of power from the centres to the edges of the networks.” William Mougayar. Cryptocurrency is based on blockchain that is focused on decentralization. Meaning, if the world would turn to the use of cryptocurrency, the government would not have control over the financial system. The government controls its population’s finances through the use of banks. That brings the question: With the rise of cryptocurrency, how will the government impose a tax? How will revenue be collected? How will the country be run? Was cryptocurrency created for a situation like this?