Financial crisis: is there a chance that cryptocurrencies will cause another one?

crisis

Financial crisis is a phenomenom, that has accompanied humanity for perhaps as long as finance has existed. According to Brett Heath, CEO of Metalla Royalty & Streaming, all documented crises have several things in common. One of those things is the adoption of a new, not very well understood technology. Essentially, after adopting a new technology, a crash occurred. He also says that cryptocurrencies create value out of nothing. Let’s take a look at whether this is a valid concern.

The answer to the crisis

The primary cryptocurrency is Bitcoin, which saw the light of day in 2009 as a response to the financial crisis at the time. That’s when there was a mass adoption of mortgage-backed securities, collateralised debt obligations. Lax credit conditions led to a lifestyle on debt, and the bursting of the housing bubble in 2005-2006 caused rates to rise rapidly. That’s when Satoshi Nakamoto created Bitcoin, which was supposed to be the answer to this crisis, or perhaps a bailout.

Around the world, many banks and other financial institutions failed. Governments had to bail them out at the expense of their taxpayers. This has highlighted the fragility of the modern financial system, where the health of the monetary system depends on banks and other financial institutions that people are forced to trust to make wise and prudent decisions with the money we give them. Unfortunately, all too often they fail to live up to this fiduciary responsibility.

Decentralization

As many cryptocurrencies are paving their way through decentralization, it is all about everyone having power over the asset, not just a select few. But when you think about how Bitcoin actually works, for example, it’s about trust – exactly the same trust that people put in banks with their money. However, the difference is that you are responsible for your money and you decide what you do with it.

So to Brett Heath’s point, it’s easy to say that if cryptocurrencies create value out of nothing, printing banknotes is not much different, because the gold standard no longer exists, unfortunately. There is a financial crisis even now, but due to the pandemic, not cryptocurrencies. Quite on the contrary, cryptocurrencies gave people hope that they would not lose their money.

Conclusion

If you are intrigued by the world of cryptocurrencies and how they work, but are worried about security, we can offer you the opportunity to try it out with our PlatonCoin (PLTC). Our wallet is insured, so our ecosystem combines the best of both worlds. For your first step into the world of cryptocurrencies, this is the perfect solution. If you’d like to learn more, drop us a line.

Source: cointelegraph.com

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