Easy money and trade wars have created a credibility problem for central banks and governments behind major national currencies.
That’s bullish for major cryptocurrencies, which have emerged as alternative stores of value, according to somecryptocurrency experts.
Alex Karasulu, Co-Founder and CEO of OptDyn, is one of them. “In the 20th century, we saw the dismantling of gold-backed sovereign currencies paving the way towards fiat currency manipulation and other kinds of central bank practices such as quantitative easing,” says Karasulu. “The gold standard kept us straight in terms of spending, debt, and limited the options available to central banks. These factors in concert now with the gradual erosion of globalism and the recent rise of trade wars applies added pressure to manipulate fiat currencies.”
|Trade War||Monetary Easing|
This trend is most evident in the US-China trade war. The two countries have been manipulating their currencies to make-up for failed trade talks, according to Karasulu. “We saw this dynamic with the reactionary drop in the Chinese Yuan with failed trade talks,” he says. “The US is doing the same, but through an indirect method by dropping interest rates, which worsens the debt spiral as money gets cheaper to loan.”
The result? “The people don’t have faith in the independence of central banks anymore,” continues Karasulu.
“People are worried about the instability of traditional currencies – I’ve seen uptake in crypto in the UK to hedge against the loss in the pound,” says Richard Dennis MSc, CEO and Founder at temtum. “A lot of people have lost trust in the government so they are putting their cash into non-government or company controlled coins.”
Like Bitcoin and other major cryptocurrencies. “Monetary policy based on math, and not government officials or agencies, is starting to sound more appealing to investors, says Chris Reinertsen, Chief Marketing Officer of Rhythm Technologies. “Bitcoin has been designed to be an eventual safe haven from government controlled currencies since its inception, but as trade and currency wars are being waged, more and more investors are looking for alternatives to avoid repeats of the last major bear market.”
Karasulu agrees. “The obvious appeal of Bitcoin and other cryptocurrencies are their immunity to manipulation, and unlike gold, or other precious metals, there’s no physical issue of safekeeping. No institution can siphon away the value of the Bitcoin you hold,” he notes. “No quantitative easing will ever take place. No country will devalue it in a currency war over trade tensions.”
That sounds too good to be true. Central banks and governments will never let any decentralized currency take the place of national currencies, as discussed in previous pieces here.