Cryptocurrency: Its real value for becoming a future of currency
According to the expectation that digital currency, especially cryptocurrency will eventually become new form of money in the upcoming future, there is a sharp increase in the number of people investing in cryptocurrencies aiming to make profit out of the speculation. Considering the upsides of cryptocurrency, it is understandable why people are tempted in participating in the cryptocurrenciesâ community, regardless of the risks arising therefrom.
Cryptocurrency is a non-fiat cryptographic electronic payment system providing a peer-to-peer entirely distributed currency that does not require the middleman, i.e. central bank, to issue or operate (A Guadamuz, and C Marsden, (2015) Blockchains and Bitcoin: regulatory responses to cryptocurrencies. First Monday, 20 (12)). In this regard, anyone can be an owner of cryptocurrency, regardless of their qualifications or real identifications. In addition, the users can transfer their cryptocurrency directly to other users including cross border payment with shorter amount of time and less transaction fee comparing to the conventional transfer means of the financial bodies.
Most importantly, cryptocurrencyâs trading markedly become popular among investors, especially those in the new generation due to its challenged features containing high return within short period of time. This high demand of investing cryptocurrencies brought about the substantial rise in the value of cryptocurrencies, yet simultaneously the wide fluctuation therein. Then, the question stemming from this highly volatile investment should be what the real value of cryptocurrency is.
The form of money in this current trend is fiat-money, i.e. banknotes, is declared legal tender. Fiat-money is issued by the national central bank in align with the amount of foreign exchange reserves of each nation. Thus, its value is determined and backed by the credit of government. Government is eligible to manage the monetary policy to circumvent the high volatility of its value for the benefit of the citizens.
Although cryptocurrency can be functioned as a medium of exchange for buying things, cryptocurrency has not yet considered as money in many countries. This means that value of cryptocurrency neither is valuable itself comparing to gold, nor backed by government. Cryptocurrency as a digital currency, in principle can be worthless, unless government and business operators widely accept it as a medium of exchange for buying things.
However, the value of cryptocurrency is likely to be unpredictable as its value tends to depend on demand for it originating from social trend attached to influencers, i.e. billionaires and famous people instead of status of world economy or price of gold and oil. To illustrate, the guardian news website revealed on 1 November 2021 that the value of squid game cryptocurrency lost all its value after jumping more than 310,000% in value because Twitter flagged the cryptocurrencyâs account and temporarily restrict it owing to the suspicious activity (https://www.theguardian.com/technology/2021/nov/01/squid-game-cryptocurrency-scam-fears-investors).
Notwithstanding cryptocurrency is unlikely to totally replace the current form of money in forthcoming future, the further development of cryptocurrency will somehow play the major role in this digital revolution era.