Cryptocurrencies: why are they dangerous?

It’s really impossible that in these months you have not heard about cryptocurrencies. These new virtual coins have invaded the market practically in every part of the world, so much so that they become an indistinguishable part of the market itself.

Today, cryptocurrencies are so widespread that they represent a real threat to traditional currencies. The articles in the newspapers that speak against Bitcoin and other cryptocurrencies are so many that you could even get lost among the many thoughts.

However, why does the government, banks and private companies try to put Bitcoin down so much to invest in anti-Bitcoin propaganda? The goal is simple: to be able to invent another electronic currency in all respects similar to Bitcoin that can take its place and, consequently, bring a profit not just to the interested people.

However, there are also objective reasons why governments and companies risk because of Bitcoin. A further increase in the value of Bitcoin, could lead to the collapse of the buying and selling shares made through the Fiat currencies (the main traditional currencies, including the euro, pounds and US dollars).

Not only that: an increase in the value of Bitcoin could represent the beginning of what in all respects can be considered as a real war against the dollar. This aspect is of fundamental importance for the geopolitical adversaries of the United States of America. A factor that could be exploited in the economic war against the US: destabilize the dollar by increasing the value of Bitcoin in order to gain economic potential.

The fear of Bitcoin and the collapse of the stock market

It is no longer a secret for a very long time that the stock market represents a valid “mirror” of the health of the US economy. A mirror that could break, considering the sudden increase in value of Bitcoin. A change that, however, can also occur in the opposite direction: the cryptocurrency can lower rapidly, decreasing, the other values ​​of the stock exchange.

To avoid sudden changes that could affect the general picture of the New York Stock Exchange, the US government tries to control Bitcoin’s value to an acceptable level. One of those that does not involve any risk neither in the case of the sudden increase, nor in the case of the rapid decrease in value.

To all this, however, another factor should also be added: mining. Since the birth of Bitcoin there have been many people who have tried to make money through mining. These are not very difficult or complex operations, but it is still an action that requires some initial investment (due to the need to purchase graphics cards). In this way Bitcoin becomes “dangerous” for traditional commerce (an aspect already mentioned earlier) and is controlled more (and in some countries of the world even defined as an investment activity). Furthermore, mining, or the creation of Bitcoins from scratch, makes it possible to raise the general level of currencies on the market and therefore can be the primary source of inflation. It is no coincidence that it is a completely prohibited activity in some countries.

Mining offers people the ability to literally make money from nothing. But, as is well known, money can not be made from nothing without resorting to dangerous sanctions on the part of the control activities. To put it briefly, therefore, Bitcoin represents a dangerous interference in what are the traditional activities. The problems that arise for banks, companies or even for the government, are many. This is another reason why the interest of central agencies is to keep Bitcoin at a level that can not be damaged.

Unwanted competition: another problem?

When it comes to Bitcoin, another important factor must also be mentioned: Bitcoin opens the door to unwanted competition among the various sectors. It opens up a whole space that must be occupied to earn the customer who instead of traditional money prefers to pay with Bitcoins.

Nothing good for the banks, which in this way, they can lose their customers who will turn to non-banking services. Nothing positive even for companies, which will have to invest more than the norm to cover the space opened by Bitcoin. Often these investments are completely unwanted and due to the rush to win the umpteenth customer rather than the real need to invest.

All of this can lead to numerous problems, the first of which concerns the possibility of making investments that are completely wrong. And, as is well known, failure to return investment can cause financial problems in companies. Problems that, in the case of small companies, would not reflect on the economic health of a country.

However, they are problems that if they hit important companies at the national level, they could cause economic inflation not just a little. Therefore, it is better not to neglect the Bitcoin trend and while trying to adapt to its innovations, do not spend more than necessary.

This is because, as already mentioned by many investors, the value of Bitcoin can reserve many surprises, as it did in the past. Its value can go down or up abruptly giving rise to all the problems concerning the volatility of the currency.

Anonymity is a problem?

When doing the buying and selling of goods, services or currencies, is it good to be identified or not? If you can buy or sell something enjoying partial or total anonymity, do you fall into what is a trap and you risk incurring state sanctions?

Difficult to answer these questions and what remains to be understood is whether anonymity represents a problem or an opportunity for freedom.

Therefore, it is not only the Government of the United States of America that shares concerns about the possibility of buying or selling Bitcoin without revealing its identified data, but also the governments of many other states.

Freedom of operation, but also the possibility of remaining anonymous, are all factors that have allowed Bitcoin to become one of the main currencies used unfortunately by criminals. They can thus hide their identity and their actions by purchasing dangerous materials and / or objects without being discovered by the official authorities. A problem for every Government, considering how in the third millennium it is trying to fight organized crime.

The risk of an illiquid market

Even today one of the main fears related to Bitcoin concerns the possibility of developing an illiquid market. Bitcoins put into circulation or those made through mining may not be enough to cover the volume of trade.

Above all, this could become a problem if market prices fall, damaging, secondly, the entire US macroeconomic sector (and not only). The problem of an illiquid market is a real scarecrow not only for governments, but also for the relevant national banks (which could be outperformed by large companies) and even for the big companies themselves (as they may not adapt to competition and lose value).

The risk of this type can be reduced by ensuring constant liquidity to the market and by keeping Bitcoin at levels that do not exceed a certain threshold. In this way it is possible to prevent a whole series of problems related to the volatility of Bitcoin and the risks that could derive from it.

But is it really correct to try to keep the price of Bitcoin under control rather than leaving it totally free at the market price?

In conclusion, I think that the Bitcoin and obviously the Blockchain, are important component of a new era of economics and human wealth. There is no dangerous but only an huge opportunity to the human being.

This is the future and it’s not possible to stop this revolution.


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