There are a few things to remember about currency in general. Early human economies (and those found in existent tribal societies) operated on different principles - gift economies, mutualism, informal debt & credit-based exchanges, etc. Economists tell a bunch of bullshit stories about barter and that leading to money to try to justify economies in civilized society, but there's zero actual evidence for that.
Many of us operate that way in our every day lives still (at least until recently, where people use paypal, venmo etc. to settle things immediately): someone buys a round of beers and you'll get them next time, you loan a neighbor a tool without charging them rent, you loan a friend a book, etc.
Currency exists in its current form thanks to a military-coinage-slavery complex (coined by David Graeber). Essentially, the value of currency is determined by the military power of the state and people live in debt peonage. Rome invades Britain. Rome then demands taxes and tribute from the conquered populace in Roman coinage. The conquered people then must sell their labor (or fruits thereof) to obtain the Roman coinage to pay the Roman rulers. They do this at significant disadvantage, of course, because you've got to get those coins from Roman soldiers and governors...
This persists today. The United States government demands taxes paid in dollars. This is one of the foundations of where the value of currency comes from - dollars are extracted from the populace under threat of force. All businesses operating in the US must also legally accept dollars (the form is irrelevant - a business can refuse cash or credit cards if it wants, but it has to accept dollars in some form). The other foundation for the dollar maintaining value is through the military & government/global institutions forcing debts elsewhere to be settled in dollars (for instance, oil markets settled in dollars). It also somewhat underlies providing aid; we'll give another country $10 in military aid, then that money filters back to US military contractors & suppliers.
Where a government's currency is basically tied to its ability to project violence, crypto has no such capability. Its value is based solely on the exchange rate between government-backed currencies and the cryptocurrency. The volatility in that value is why it's essentially useless as an actual currency (similar to the currency volatility you see in failing countries). It also doesn't track as an inflationary hedge, like hard assets such as real estate or gold. At its core, it's a pyramid scheme (though I'd also argue that most of the global financial industry is a pyramid scheme too, so that's not a hard critique). And like any pyramid scheme, there's value to be had if you get in on the rise and get out before the collapse. And if you really want to play the pyramid scheme, you can buy derivatives now; just bet on whether bitcoin is going to rise or fall instead of actually holding bitcoin, for instance.
Crypto market takes a dive(Read 4670 times)