There has been a lot of talks about Government Rule and Regulation to control cryptocurrency, especially the case of total crypto ban in China. I could see from the mood and tone of the market against the control over the financial freedom of individuals. However I still cannot imagine how this world is going to be when everyone holds cryptocurrency without fiat currency in use anymore.
Somehow Cryptos and Fiats have a close relation, a tie that can hardly break.When it comes to money as an exchange medium, Fiat currencies in every country need to have golds as a backup. There are also several other dimensions to take into account. This is the mechanism in use for centuries. However I'm not against crypto as a medium for exchange, but I think it still have a long way to go. If we are going to rely on smart contract, it has to be certified by a reliable party. It has to be backed by assets that can hold their value forever, to make sure what we are holding is not just a toy token. It needs to have liquidity and accessibility so that businesses can run and people can live their life.
Before crypto can replace fiat, there are several factors to overcome:
Price Fluctuation
Today El Salvado has already put Bitcoin as their major currency. However, practically I think it might be hard for individuals or businesses to pay or receive BTC which might swing hughly in value and have a lot of effects on business performance. A profitable business could turn stale in the next day without prior notice due to BTC fluctuation in value. Imagine when you buy a car, for example at 2 BTCs which is about $110,000 today, tomorrow you may find out you can buy it less than $100,000 in fiat, before you know that you may have to pay only 1BTC if it moons at year end as experts predicted.
Still USD as exchange medium
All cryptos are still evaluated and talked of their value in USD. We still buy and sell Crypto in USD. We still hold and see its value growing in USD. Why do we still evaluate Bitcoin in USD? I think the reason is its stability, liquidity, accessibility and trust of USD as an exchange medium. Moreover, USD direction also affect crypto movement as we could see from FOMC meeting in a few months back. We can't deny USD direction still have a lot of effects on crypto price, same as other commodities.
Trust and Belief
If we are going to implement Bitcoin as a major currency, the question is how many of us today that have 100% of their assets in cryptocurrency. We are still advised to invest only the amount that we can afford to lose, which is totally contradict to our end goal.
Again I am not against crypto as an exchange medium. We can see a progress that many cryptos have made. They have fixed a lot of problems on traditional monetary system, but there are still a lot of other dimensions that cryptos lack and they are still on a long path until they can proof themselves as a strong medium of exchange.
