Why is Cryptocurrency important?

Cryptocurrency, a digital or virtual currency, has generated a lot of interest lately. Cryptocurrency is an internet-based based medium of exchange. What is the buzz all about? Why have cryptocurrencies become so important?

Why is cryptocurrency important?

Despite being a medium of exchange, a cryptocurrency is not issued by any central bank or monetary authority. The digital currency’s decentralized nature is also the main reason why governments are also afraid of it. Cryptocurrency has the potential to undermine the authority of central banks and monetary authorities. At times, these currencies can be used to circumvent capital controls. Cryptocurrency exchanges are regulated. However, due to their recent origin and lack of definition, many authorities claim control over their regulation.

Why have cryptocurrencies become so popular?

There is a reason why cryptocurrencies have become so popular. They make it very convenient to transfer funds between two parties. There is no need for a third party or a middleman. Also, the processing charges are low compared to the traditional charges levied by banks or other financial institutions.

Investing argument in favour of cryptocurrencies

Another argument given in favour of investment in cryptocurrencies is similar to the argument for gold investing. Currently, gold is trading at near all-time highs. One of the reasons is the relentless money printing by central banks. The money printing erodes the value of the fiat currency, which undermine investors’ confidence in the currency. Other central bank activities, like negative interest rates and asset purchases, have also driven investors toward cryptocurrencies like bitcoin. Cryptocurrencies are also seen as a hedge against inflation.

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