Can Cryptocurrency Become a Useable Form of Money?
One ex-hedge fund manager, Michael Novograts stated his opinion on the subject of cryptocurrency in a recent interview. His main point regarding the currency essentially states that they are not a currency due to their volatility.
Novograts stated that “for something to be a currency, you need stability. When you step back and walk away from the screens, the dollar-yen exchange rate has been plus or minus 15% for much of the last 15 years. The euro has been the same way.”
Volatility can be a large factor in assessing an individuals confidence in the market. This is a large part of why some choose to not invest in cryptocurrency. This also shows itself in those who invest in blue chip stocks versus those who trade penny stocks. The volatility plays a large part.
Stability is a large part of currency. Given that currency can topple the country that relies on it or even the market, a currency’s stability is extremely important. No one can really even predict what amount bitcoin will be at in an hour, let alone a year from now. This leaves a level of uncertainty that divides cryptocurrency from a fiat currency such as the dollar.
Looking at different parts of the cryptocurrency market such as the supply, circulation, market cap, and rate of issuance, one can deduce certain characteristics of what may happen to pricing. One issue that comes to mind is if a group possesses a large amount of the currency, it can drastically change the value. Certain coins in the market have more volatility than others, but it would be a fair statement to make that the market on cryptocurrency as a whole is extremely unpredictable and volatile. Investing may yield large returns, but it is always important to do your homework before putting any money in a market.