Fiat Currencies Versus Cryptocurrencies: Pros, Cons, Profits, And Safety

The decentralized, borderless technologies have completely disrupted and revolutionized the financial system forever –– and it all happened with lightning speed. Adoption has been hastened further in the post-pandemic world due to several key reasons.

The spread of adoption has ultimately forced government regulators from different countries globally to legalize cryptocurrencies or consider integrating them directly within the traditional financial system. Many countries are considering creating central bank-issued digital currencies as a result. But why did this happen, and why are cryptocurrencies such a revolutionary technology that has suddenly attracted a broad range of retail and institutional investment? We’ll examine these critical questions and much more in the article below.

COVID Creates Cashless Society

At the onset of COVID, the World Health Organization recommended that people ditch cash in favor of digital, contactless payments like Venmo, Cash App, or Apple Pay. While the WHO didn’t call out crypto specifically, it was a sign of the times changing.

The spread of the pandemic also forced the shutdown of many businesses, including financial institutions. Getting cash or accessing your own money became more of a challenge for the first time in many people’s lives. Meanwhile, the Bitcoin blockchain and thousands of others kept moving money across the world without any slowdown.

During this time, the apps that the WHO was referencing eventually began to add support for cryptocurrencies. Cash App offers dozens of Bitcoin-related products and services, such as the ability to have your salary converted into BTC. Venmo and its parent brand PayPal each added support for BTC, ETH, LTC, and BCH.

Pandemic Stimulus Creates Inflation Imbalance

Another reason for the explosion in interest surrounding cryptocurrencies was due to the stimulus packages designed to keep the economy afloat, costing governments so much. It forced governments to take on debt and expand the money supply rapidly.

According to Wikipedia, “monetarism is a school of thought in monetary economics that emphasizes the role of governments in controlling the amount of money in circulation.” Following this theory, as the economy grows, the government should expand the money supply to support growth. During a period of decline, the government would –– in theory –– reduce the money supply. Doing so keeps inflation at a low enough level to prevent harm to the economy. Simply put, inflation is positive when kept at a reasonable rate.

The problem here is that those in control of this policy are human and driven by greed. 80% of the US money supply was produced over the last 14 years since the Great Recession. The money printer was put into overdrive following the pandemic, and as a result, inflation has risen to the highest level in the last 40 years. Because of this, businesses and individuals who save their money in the dollar suffer, and it could lead to extremely negative consequences for the economy.

This is another area where cryptocurrencies show unconventional promise. Many cryptocurrencies, for example, Bitcoin and Litecoin, have a deflationary model. The supply of these coins is strictly finite, and this scarcity is limited by the cryptocurrency’s underlying code. This design makes it possible to fight against inflation long term and prevent human greed from debasing the cryptocurrency. By design, the coin becomes more expensive over time as more participants transact across the network.

Pre-Recession Profits And New Opportunities

The downside to cryptocurrencies is that they are highly volatile. Bitcoin has lost more than 50% of its value from all-time highs. However, at the same time, it has grown by more than a million percent in the last decade from virtually worthless to roughly $38,000 per coin currently. Meanwhile, the buying power of fiat currencies has only dropped significantly in the same timeframe.

As such, fiat currencies that traditionally have been used for savings now make an inferior investment or place to park money. It is unprofitable to keep money in a bank account long-term or invest in government bonds. On the other hand, cryptocurrencies can be bought and forgotten about for ten years and would likely lead to a substantial profit.

Mexican billionaire Ricardo Salinas says it is silly to check the price of Bitcoin frequently, saying that “you wouldn’t check the price of your house that often.” Bitcoin itself is even more scarce than real estate, and look how real estate prices have appreciated throughout history.

In addition, cryptocurrencies are creating new ways to make money through tools such as staking, farming, or copy trading. These tools also carry risks but can be used to substantially increase capital and do so passively. Passive income on traditional savings accounts is less than 0.1% and, with today’s inflation rate factored in, actually loses buying power over time. Passive income on staking using a tool like PrimeXBT’s yield accounts provides up to 14% in variable APY. By comparison, it is easy to see how crypto is stealing the show.

Profits are sometimes even produced out of what seems like thin air across crypto. Promising blockchain-based projects conduct airdrops and other promotions that deliver tokens for free or very cheap. And while cheap or even free tokens are easy to ignore, thinking they are worthless, many eventually become incredibly expensive. The most recent example was from the NFT project, The Bored Ape Yacht Club. The project distributed 15% of a new token called ApeCoin to NFT holders. These free tokens have since risen from roughly $7 per APE to a high of $28.

Safety Against Seizure Or Sanctions

It might sound impossible if you are from America, but inflation rates have reached 140% in other countries like Lebanon. It isn’t very comforting to think that your money could depreciate to zero, even with the government involved. When times get tough, the government gets controlling, and there is nothing that can be done if you are using their money. Accounts and assets can be frozen or seized.

The escalating conflict in Ukraine has made the subject of sanctions something that every oligarch across the globe should consider cryptocurrencies for. Unlike fiat currencies that can be controlled, blocked, or stopped by controlling governments, the Bitcoin blockchain is fully decentralized, doesn’t discriminate, and cannot be stopped.

Granted, because of the transparency involved with the blockchain ledger Bitcoin is built on, coins can be traced, and it is possible to force centralized exchanges from blocking any transactions to or from the platform. However, from one Bitcoin wallet to another, there is nothing any government can do to intervene.

About PrimeXBT Products And Services

With a reputable trading platform like PrimeXBT, users can buy verified and clean Bitcoin, begin trading or access a variety of cryptocurrency-based products and services. All of the most profitable solutions outlined in this article are offered at the award-winning PrimeXBT.

The main attraction is margin trading with more than 100 different of today’s most popular and trending trading instruments, including gold, oil, the S&P 500, Bitcoin, Ethereum, and many more. Long and short positions combined with built-in charting tools give traders total flexibility and control over their trading portfolio using a single, secure account.

PrimeXBT also offers a peer-to-peer copy trading community called Covesting. For those that struggle with crypto market volatility, the Covesting copy trading module lets novice traders follow and copy the trades of more skilled strategy managers. These strategy managers are ranked by performance in a transparent leaderboard system that followers can use to pick a winner.

No matter what product or service you use, there are profits abound. The next time you consider where your fiat money is going to go next, consider putting it to work for you at PrimeXBT.