The Hype Around Cryptocurrency Speculation

Most people hate carrying and spending cash. It’s inconvenient. It’s bulky. You risk losing it. And when you spend it, you get your change, creating MORE bulk. Some use cash because it is anonymous. It’s hard to trace or tax.

Charge cards (Credit or Debit Cards) remove a lot of this friction. You carry one card instead of many bills, you pay in exact change, and there is less risk of theft or loss—if you lose a charge card, you report it as lost or stolen and are not liable. Thus, charge cards are a more convenient means of spending money than cash is.

Near-Field Communication (NFC, for short, like contactless credit cards, Apple Pay, etc) makes this even easier. You may have less to carry but still get the benefits of a charge card.

The drawback of using Credit Cards is if you don’t pay back your balance in full by your statement date, you pay hefty interest charges. The drawback of spending with a Debit Card is the risk of overdrawing your account. And in both cases, all of your spending is traceable, which some do not like.

Cryptocurrencies theoretically get you the best of both worlds. You get the anonymity and privacy of cash, with the digital convenience of paying with a Charge Card.

The problem with Cryptocurrencies is that their primary use to date has not been for spending like currency is meant for, but for speculative investment.

This speculative hype has caused a lot of volatility in its value. And with this volatility, who would want to spend or accept crypto? As a holder of Crypto, you’d rather not spend it since the value is currently rapidly rising. As a business, you wouldn’t want to accept it when the price falls.

So presently, Crypto isn’t realizing the purpose that currencies offer. Purchasing it now amounts to glorified gambling. Will you probably make money if you invest in Crypto in the near term? Yes. How long will that last? Who knows?

I see many parallels to the problems that led to the 2008 financial collapse (although our economy doesn’t seem reliant on crypto like it did on Wall Street back then).

• Investor greed is causing a bubble on securities with very little actual value. The value is all theoretical at this point.
• “Derivative” instruments are being created in the form of NFTs and Social Currencies. All seem very creative and interesting concepts. But they are all dependent on the value of Crypto, which again, is currently very suspect.
  

Sure, Crypto promises to be the wave of the future in currency. But which cryptocurrency variant will gain adoption? Any of them? A new one? Some other new invention based on the theory of Crypto and the Blockchain?

So, until a digital currency is invented that actually makes its use more convenient for the consumer to spend, a lot more innovation will need to take place before this technology is viable as a real currency.

And this viability and adoption will define the value of the currency. Not how cool the tech is.

This is a bubble and it will burst. The hype is dangerous, but the creativity is indeed leading to some amazing breakthroughs.