If cryptocurrencies like Bitcoin operate much like FIAT money, why would people want to utilize these digital currencies instead of the regular ones that we have known all our lives? The question is a pretty fair one, and the truth is that the answer will depend very much upon you and the reason you want to use cryptos.
Why Do People Want Cryptocurrencies?
Disapproval for the Federal Reserve:
Digital coin enthusiasts do not feel that government entities should have the power to dictate these fluctuations in the money supply. One of the original goals of a cryptocurrency is to avoid inflation altogether. That is why Bitcoin has a maximum number of coins – 21 million – it can ever have in circulation.
The early crypto adopters saw the coin as a way of spending without having to succumb to the terms and conditions defined by the central bank. Regular currencies are prone to inflation – which, in the US, is determined to an extent by the Fed (Federal Reserve).
The Fed uses interest rates to determine the amount of dollars that will flow through the US markets. To put it basically, the greater this amount, the higher the supply of dollars, and the lower its value would be. On the flipside, the lower the dollar supply, the higher the value. The Fed wants to keep inflation stable in order to keep the economy from growing too fast (such hyper-growth can cause overvaluation of the services and goods that we purchase, thereby damaging the currency). In addition, hyperinflation has the potential to devalue the overall currency, which is why the Federal Reserve tries to keep inflation from going beyond control.
The business case:
Even though crypto might have started out as little more than a libertarian fantasy, it does have legit business uses. Spending money costs money, and, as weird as it might be, financial institutions such as banks have not become so large without good reason. The reason is that they can charge fees in any way since you cannot move money without using their systems. From a business perspective, this can turn out to be immensely costly.
Let us consider an example to drive the point home. Assume that an American is visiting France for his vacation, for which he would have to obtain euros in exchange for dollars. When the person visits the airport exchange counter, he pays more money than he receives, since the euro is worth more than the dollar.
In addition, the person also loses a considerable chunk of the payment in the form of the exchange agency’s fees that it charges for giving him the euros against the dollars. Now, consider the same scenario on a much broader scale, where businesses make such large currency exchanges every single day. Naturally, there would be a high incentive to lower the costs.
And it is here that digital currencies score a point over FIAT – since cryptos are not tangible, they can serve as independent third parties. Rather than visiting an exchange agency, you can easily use your dollars to purchase digital currencies, and then sell the same currencies in exchange for euros. These transactions shall be performed by a decentralized crypto platform, which means that you will have to endure no charges other than the processing fee. Organizations and financial institutions are beginning to understand this value, specifically in regions where local currencies are subject to instability.
To sum up, this article attempted to address a couple of the primary reasons that crypto is preferred to FIAT currency. In other words, crypto is here to stay, and if you want to be a part of this lucrative journey, please feel free to visit https://quantum-ai-trading.com/.