Ryan Stancil,
Editor
April 2, 2021
Cryptocurrencies.
Whether you’re interested in them as an investment or not, you’ve no doubt heard about them.
It’s been kind of hard not to, especially since the start of this year when the price of many cryptocurrencies skyrocketed. Both Bitcoin and Ethereum, the two most popular cryptos doubled in price and hit all-time highs. This led to a mad rush, with investors wanting to get in on the rising value before the ship has sailed.
The value of cryptocurrency, like anything else in the market, moves in cycles. It was only a few short years ago that Bitcoin, Ethereum, and other cryptos were enjoying headline domination and the climb in value that comes along with it. Those prices pulled back, of course, until January of this year when they started taking off again.
People were talking about cryptos again. As a result, governments, professional investors, and market commentators were once again taking notice.
For a lot of people, this latest climb in value was evidence that cryptos, love them or hate them, are here to stay.
Or are they?
Even as the values of these coins climb, there are rumblings that they may not be the market mainstays many people think they are.
It doesn’t really have to do with investors eventually losing interest. It’s more a matter of what governments will do about these coins.
A few weeks ago, it was revealed that India will propose a law banning cryptocurrency. Anyone trading or even holding these digital assets would face fines. The bill is being finalized right now and is part of a larger push by the country to ban any private virtual currency. Changes may come to the bill, but there is ultimately optimism that it will become law. If it does pass, India would be the first major economy to ban these assets across the board.
So, why is this happening?
India isn’t the first country to take action against cryptos. Other countries like China, Russia, and Pakistan also have restrictions in place. It’s just that India’s case is especially noteworthy because it goes beyond what any other country has done.
And if India follows through with this, it may serve as a test for what other major economies will eventually do.
The reason this is happening at all is because India is seeking to stamp out any competition that may threaten its own potential central bank digital currency (CBDC). These are essentially central bank-controlled currencies that only exist in digital form. They have the backing of their country’s government and will be used similar to how we already use cash electronically.
No national central bank has launched anything like this yet, but many are researching it and China has done a trial run of it in some of its major cities.
Christine Lagarde, president of the European Central Bank, said that it’s possible the ECB could launch its own digital currency in a few short years. All it needs is approval to start the experiment this summer.
CBDCs are only a concept right now, one that advocates say could increase financial inclusion and lead to easier international transactions, among other advantages. But critics see this as another attempt at government overreach, an effort to exercise another level of control against which the average person would have no choice.
And those criticisms say it would start with banning cryptocurrencies.
Ray Dalio, co-chief investment officer of the world's largest hedge fund, Bridgewater Associates, thinks it will happen. When asked if it was possible crypto might get banned, he answered, “Every country treasures its monopoly on controlling the supply and demand...They don’t want other monies to be operating or competing, because things can get out of control. So I think that it would be very likely that you will have it under a certain set of circumstances outlawed the way gold was outlawed.”
Treasury Secretary Janet Yellen recently said that Bitcoin was “an extremely inefficient way of conducting transactions” and “It is a highly speculative asset and you know I think people should be aware it can be extremely volatile and I do worry about potential losses that investors can suffer.”
This is similar to comments made by Federal Reserve Chairman Jerome Powell, who said the cryptocurrency was “not really useful as a store of value” since it isn’t backed by anything.
So, in short, even though nothing is confirmed, the trends as of late point to things possibly moving in that direction.
It’s one more thing for investors to be aware of as they navigate the constantly changing investment landscape. Whether you care about cryptos or not, it always helps to be aware of what your government decides is best for you so you can act accordingly.
Keep your eyes open,
Ryan Stancil
Editor, Daily Profit Cycle
Ryan Stancil is an editor and regular contributor to Daily Profit Cycle. He’s been active in the financial publishing industry for more than half a decade, offering insights and commentary on technology and geopolitics to help readers make sense of the constantly changing landscape and how it affects their investments. His readers appreciate his "tell it as it is" writing style, where he always offers a fresh new perspective on what's happening in the market and leaves nothing unsaid.