Economists are by no means unanimous about how the relationship between the new generation of digital currencies and traditional money will develop. Bitcoin – a threat to all major currencies
Are cryptocurrencies a threat to traditional money? Can electronic coins shake classic means of payment and undermine their value? The debate erupted after former US President Donald Trump said earlier this week that bitcoin was a “US dollar scam.” In the spirit of his slogan – to make America great again – Trump probably aimed to keep the dollar as a valuable and stable currency that the whole world handles. That was decades ago, but the rise of the euro – the EU’s currency – dethroned the dollar as the “currency of the world,” as Trump calls it, the BBC reported. Justin Urquhart-Stewart, co-founder of Seven Investment Management and the Regional Investment Platform, believes bitcoin poses a potential threat of currency destabilization. Because “it took off in such a way that it created popularity and attractiveness without any stable financial force.”
The economist blames individuals like Elon Musk for the rise in bitcoin prices. According to him, these are people who “behave stupidly”, which in turn leads the general public to believe that cryptocurrency is reliable and can be trusted. “Bitcoin is dangerous because it tries to build a level of trust in an unreliable and completely unjustified form of value,” says Urquhart-Stewart.
Quite often, illiterate whims are attracted at the wrong time to something that they think can bring quick profits, says Urquhart-Stewart. “It doesn’t matter to them what it is, whether it’s bitcoin, or GameStop, or AMC – they believe it’s something you can bet on.” This is not all. According to the economist, the growing tendency of young people who have some understanding of technology to take huge risks is combined with the fact that they have not been taught to handle money properly. Urquhart-Stewart firmly believes that the national education system should include training in how to manage and develop family finances. “What we have now is a young generation of players who have no knowledge of financial planning and development,” said Urquhart-Stewart. “They see things being bought and sold, but they have no idea how to create long-term wealth.”
There is no threat to traditional money The opposite view is held by Neil Wilson, chief market analyst for Markets.com. He believes that bitcoin is definitely not a currency. He says that in order to qualify as a currency, it must have the following functions and properties: “I call bitcoin a security, something like a stock or a bond,” says Wilson. “Although popular, this thing is too volatile to be a currency – it moves more than most stocks.” He explains that in cryptocurrencies, people mostly buy to “hold something” and invest, instead of paying as money is spent.
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