Five Features of Cryptocurrencies that Beats Fiat as COVID-19 Halts Global Markets
As coronavirus halts and bullies the global market and economy, many people are seeking the best means to secure their wealth by converting it to a more stable and reliable store of value. This is one big reason why cryptocurrency is valuable – its resilience to economic crises.
Fiat has helped in many ways and will likely remain a store of value all over the world, but as you know it, the economic downturn is taking a bad toll on the financial situation of some countries.
Recession will likely hit the world's economies , and that’s all because of the way the traditional fiat works. Think about this scenario- assuming countries use cryptocurrency, tit will be largely untied to economic vagaries.
There are many other crypto features that beat the traditional fiat in and out of a pandemic, and I will share the top 5 features with you in the following paragraphs.
1. Resistance to Inflation
The strength of fiat currency is dependent on the strength of its issuing body – the government. Although the use and regulation of fiat currency is supposed to ensure stability, times of recession and rapid inflation in the past have proven that this is not always the case.
According to a recent CEIC data, China’s consumer price index rose by 5.2% in February after rising for about 5.4% in January. The price rise was a result of economic activities that have been curtailed in a larger part of the country due to the coronavirus outbreak.
This is not the case for cryptocurrency. Bitcoin, for example, has a fixed supply of 21,000,000 units, which even become harder to mine by the day, thus making it even scarcer than gold and reducing the chances of having an inflation.
2. Increasing Purchasing Power
As the coronavirus pandemic causes global markets to fall, world leaders like Donald Trump had to resort to quantitative easing. This has led to an increase in the amount of money in circulation, reducing the purchasing power of the U.S Dollar as a result.
On the other hand, the purchasing power of cryptocurrency does not decrease but increases over time, mainly because of its in-built scarcity and limited supply.
3. Ease of Transaction
Cryptocurrency, unlike traditional fiats, works with a decentralized system that makes it easy to spend money, store money, and transfer money to anybody, anywhere, and within a short time all over the world. You don’t have to go through the hassle of verification and other annoying protocols that many banking institutions uphold.
4. Intrinsic Value
Traditional fiat leans on a debt system for its circulation, while cryptocurrency has its intrinsic value, which is a function of how effective it is as a medium of exchange.
Fiat is aimed at being a transparent measure of value, but the FEDs of this world often gets in the way. Corrupt people tend to twist things to their favor. There are concerns though in the crypto world, but the transparency that crypto offers make it easy for the market to auto-correct.
These are uncertain times to accumulate fiat, however you can act wisely by diversifying your cash and holding some rare metals and crypto in addition.