Over time the division of labor becomes larger and people become more efficient. Money becomes broadly employed due to the many transactions it facilitates. Thus the market gives rise to money. But it doesn’t happen quickly. It doesn’t become popular rapidly as bitcoin has done.
People are buying cryptocurrencies as an investment more than as “money.” Money is a “tool of production” that makes goods and services easier to obtain. People do not invent money on purpose. Real money is predictable and creating it is a long-term process.
It is true that the rapid run up of cryptocurrencies make what is being paid a form of investment, and this is a danger sign. On the other hand, we need not write off cryptocurrencies just because they may be overpriced. There are numerous reasons for the high valuations that have to do with the larger state of money in the 21st century.
Money, as North puts it, is a mostly stable commodity that facilitates other purchases. But money in the 21st century is also the product of central banking which may be increasingly problematic. Central banking money is highly manipulated and interest rates—and even the volume of money itself—are set by the bank not by the market place.
Cryptocurrencies like bitcoin, on the other hand, are money with a fixed limit after which no more can be created. If money were not controlled by central banks, the price would likely lift gradually rather than fall constantly as it does now. People would see their savings gradually accrue in value and this would expand their net worth over time.
Cryptocurrencies Obliterated?
The current stock market bubble is much bigger than cryptocurrencies. It is a bubble that has blown up because of general stock market and money manipulation. As of this writing it is one of the longest, if not THE longest, bull market in history and like all other bull markets will not survive forever. When it comes down, it will likely be with a shattering crash. This doesn’t mean that all cryptocurrencies will be obliterated. Just as not all dot.com companies vanished during the late 1990s crash. Some new and private money will likely remain.
Blockchain too is going to survive in one form or another because it is basically a way of creating a public ledger. It won’t be affected as much as cryptocurrences by any upcoming crash. There is a lot of energy and effort tied up in both cryptocurrencies and blockchain. This article is written with the idea that at least some new money is going to survive in one form or another and that there are many ways that it will change the way we live and do business. Perhaps cryptocurrencies will not survive, but our guess is that some will survive in some form,
Of course that form may be considerably vitiated. In fact that’s the larger problem facing the new Internet and banks alike, especially central banks. Such banks are watering down the creation and implementation of both blockchain and cryptocurrencies. They are refusing to broadcast blockchain with enough non-insider nodes to make it public. They are making cryptocurrencies too much like our current central bank money.
Regulation Versus Markets