Ever since digital currencies came to light, in 2008, a period that coincides with that of the financial crisis of this time and when a person (or group of people) under the anonymous name Satoshi Nakamato, published a scientific paper entitled “Bitcoin, a peer-to-peer electronic cash system”, events and developments have been numerous and large. The cryptocurrencies themselves followed each other, from Bitcoin to Litecoin, from Ethereum to ZEC, from DASH, to Monero, NEO, etc. Along with them also the digital platforms in their function were developed. They became part of the monetary payment system and even investments in markets. This, while the global economy and the financial world were hit during this period by the economic recession caused by the Covid-19 Pandemic and the consequences and threats of the energy and food crisis, high inflation and “crazy price increases”, as a result of the Russian war in Ukraine. What happened to electronic money and Bitcoin as their father?
Cryptocurrency as a development
The 15 years of life of cryptocurrencies have been associated not only with their transformation from an idea into a reality, developing the largest electronic platforms for trading these cryptocurrencies, but also with debates and dilemmas about the role and their future. Are they a development or a hoax and speculation?
Undoubtedly from the point of view of form, the way of using digital currencies in monetary transactions through electronic platforms, they are a product and part of the unimaginable development of digital technology, which has already become a comprehensive part of the “new life” of this century.
What are the innovations brought about by the birth, development and use of cryptocurrencies?
From a monetary point of view, a new currency was introduced into circulation, for the purpose of payment-transaction and investment, which aims to become an international currency.
But, as is well known, the main developments of the system and the international currency are related to the creation of the international monetary system, that of Bretton Woods (1944). This was the first system used after World War II to control the value of money between different countries, which meant that each country had to have a monetary policy that kept the exchange rate of its currency within a fixed value – plus or minus one percent – in gold terms (at US $ 35 per troy ounce of fine gold, or 0.88867 grams of fine gold per dollar). But as is well known, it was the Nixon presidency that caused the Bretton Woods system to collapse, formally suspending the dollar’s conversion into gold on August 15, 1971. That ended a key aspect of the Bretton Woods system. The rest of the system, the adjustable peg, disappeared in March 1973. Although the US dollar continues to be the strongest international currency even after the collapse of this system, the introduction in the monetary market in 1999 of the common European currency Euro was a historic development in the international monetary system. And then, digital currencies after 2008 were seen as a major attempt to move towards an international role as a currency (although they are still a long way from that goal).
-From the point of view of legislation development and regulatory acts, it is still in its infancy as there are few countries that have undertaken legal acts regulating the activity of these currencies, although many regulatory authorities or the Central Bank have issued more acts to control it and to be vigilant about this innovation rather than to motivate it.
-From the technological point of view, the quickly evolving digital platforms enable the ease of their use in a very fast time and the increase of their security guarantees.
-At the same time, this development of the use of cryptocurrencies, not only greatly changed the culture, techniques and way of working in their use, especially in transactions, but revolutionized financial and monetary culture and enriched the terminology of the monetary world for users and financial markets, analysts of these markets and economists and financiers.
-Finally, the phenomenon of digital currencies and the creation of their market marked a new era in the monetary field (which continues today) accompanied by debates about this phenomenon, what role and function it will have in the future compared to the already consolidated and classical role and functions of money. And further:
-What constitutes the core of the debate is the coverage in gold or in any other form by the Central Banks of this currency. And if this development is to reach its full goal, moreover in the context of post-Covid global developments and the war in Ukraine, to become an international currency, should the financial world turn to a New Bretton Woods? What does the reality say?
Are cryptocurrencies a fraud?
When the first investors “rushed” to invest in cryptocurrencies and started using digital platforms for the first payment transfers, it seemed they ‘struck gold’. So Bitcoin, the “heart” of the cryptocurrency, experienced its boom with the expected ups and downs of the market. With the start of the war in Ukraine and the ensuing crisis, it seemed that this currency would be the “magic wand” of salvation from the economic and financial crisis that is threatening the global economy and high inflation.
But the disappointment was quick. Not only did this not happen, but on the contrary, the shock of major cryptocurrencies was very strong. This earthquake, whose circles continue to expand, deeply shook the confidence of investors whose losses count billions of dollars and the number of victims of this phenomenon is becoming shocking. But how did this situation come about? Why do economic analysts already view this situation as too negative? Is this because of the uncertainties these currencies carried since their creation? Is this because of the attitudes and clashes of multibillionaire giants about these coins and its psychological effect? Or the war in Ukraine and the economic, energy and price crisis are to blame, as they hit the large and small investors of these digital currencies? Or all of the above? Let’s refer to some of the latest information:
-While the war in Ukraine is not stopping and the threat of multiple crises continues to grow, reports from the cryptocurrency markets are quite depressing.
– Few days ago was announced that a collapse of Bitcoin threatens San Salvador, the first state where this currency was legalized and put into use.
-Another shocking news comes from the world of digital currencies: They manipulated the Dogecoin price into a “crypto-pyramid scheme”: Elon Musk, SpaceX and Tesla are sued for $ 258 billion for embezzlement in federal court, claiming that Musk “manipulated” the Dogecoin price via Twitter. The lawsuit alleges that the Dogecoin cryptocurrency, launched in 2013, was an “illegal fraudulent enterprise” motivated by promotion and manipulation on Twitter.
-This news comes at a time when the shock in the cryptocurrency markets is increasing, which is evidenced by the fact that Binance, the world’s largest platform for trading cryptocurrencies, temporarily suspended payments on Bitcoin and the value of Bitcoin has fallen by more than 10 percent, or under $ 24,000 a piece, which is the lowest level since December 2020. Market capitalization has shrunk to $ 430 billion and its dominance has shrunk by 2% overnight.
Meanwhile, billionaire Bill Gate described the cryptocurrency phenomenon as “100% based on the greatest theoretical stupidity.”
Another explosive statement came from billionaire Warren Buffett, who stated that he will not offer even 25 dollars for the entire amount of Bitcoin circulating in the world. “I will not buy them even for25 dollars, because what could I do with it? One way or another I will have to sell it to you again. But with them you can do nothing”.
Undoubtedly, these statements are not just a confrontation with the owner of “Amazon” (who is currently sponsoring his digital currency – Amazon) or Elon Musk (already accused of fraudulent cryptocurrency scheme), but they are also a call for vigilance to all investors, large and small, who have and are investing in the cryptocurrency market. And the psychological effect, no doubt, cannot be negligible.
This situation proves that dilemmas and questions about the future of cryptocurrencies are still unresolved. Who will win? Honest technological development or manipulation and deception? Let’s wait and see.
(*Academician, economy expert, former MP and minister, Panorama, June 20, 2022)
