Last Updated on 8 months by Shubham Attri
Cryptocurrency has been with us for over 10 years now, and has led to a lot of debate regarding all of the different ways in which it is likely to impact the world and the global economy, as well as our everyday lives.
Crypto is here to stay. Most people are in agreement that in one form or another, it is going to remain a part of our lives, even if not everybody embraces it right now. The industry is still in a fledgling state and there are a number of factors that influence pricing. Inflation or deflation (if you’re wondering what is deflation, you can explore more here) and things like competition in the industry or even cybersecurity concerns can impact the prices of crypto. These can also alter the public’s perception of these currencies.
So, in this guide, we explore what cryptocurrency is likely to mean for the economy in the future.
The Economic Outlook on Crypto
Like so many different aspects of life, there are those who think crypto is an amazing thing for the economy, and those who believe the opposite. The truth is likely to be somewhere in the middle. There are pros and cons of cryptocurrencies and the way it impacts an existing economy that has been built over thousands of years, and in spite of many different studies, it is not known for certain what will happen over the coming years.
One of the biggest potential positive impacts of cryptocurrencies on the economy is the fact that they can be used to mitigate against huge levels of inflation.
Cryptocurrencies can be created by a process known as mining and in most circumstances, there is a finite supply of the coins. This means that there is no single organization or bank that can decide to print more at their will, something that often causes inflation or can even lead to hyperinflation.
If regulated and controlled properly, there is every chance that Bitcoin and other cryptocurrencies can provide a way to stabilize the economy. Did you know that there are even things called “stable coins”, which are linked to a physical asset such as gold? Investing in these coins is another way in which people can avoid huge levels of inflation.
Cryptocurrency is not designed to be just an investment item. Though a lot of people have gone this route in recent years, the currency is designed to be used, and this can make finances much more accessible and change the way people buy, sell and transfer finances.
Cryptocurrencies have their downsides, too, and things that people are concerned about. For one thing, the fact that the industry is so new means that there isn’t as much regulation as there is in other forms of finances and financial industries.
Some people are concerned about using crypto and buying it due to the fact that there are people who use it in ways that are linked to crime – for example, by using it in the same way as cash is often used in criminal enterprises. Crypto could also provide an opportunity for money to be laundered. The fact that banks and governments cannot easily track and control the industry can create opportunities for some shady activities.
Cryptocurrency companies also tend to set their own rules about how to create more of a currency, and though most are based on solid foundations, there is the potential for companies to change the way crypto is mined and cause a sort of cryptocurrency inflation.
Crypto can also be incredibly volatile. This is something that we have seen, even with the most valuable currencies out there. Bitcoin has been known to increase and decrease in price dramatically, based on things like public perception and even rumors. Predictions also are not always reliable – for instance, if a big company decided they were no longer going to allow people to buy from them using crypto, this could affect the value of the currencies.
Some of the smaller coins can increase and decrease in value by hundreds of percent. This can lead to a huge variation in the value of your financial portfolio, and it means some people are reluctant to fully trust in the currencies on the market.
In summary, it is fair to say that cryptocurrencies could certainly be a good thing for the economy, making it more accessible for all and even helping to control inflation in the long term, preventing economic problems from arising.