Crypto Needs To Become A Closed Loop

Crypto Needs To Become A Closed Loop | Ecency

Hey Jessinvestors

I think we’re all pretty excited about the price of Bitcoin and other crypto-assets. Let the good times roll, am I right?

Some are cashing out, and others jump in as the 4 year supply shock tends to do with bigger volumes each time. Bitcoin recently smashed through $60k only to pull back, and I wanted to get in on the dip.

I tried to load up my fiat wallet to buy some and top up my automated buying account, but the money hasn’t cleared in 24 hours. That’s pretty annoying, like hello?

Shut up and take my money and give me some magical internet coins. Normally I load up way before the time, so I can quickly switch in when there's a dip, but his time, I was caught off guard.

While I was waiting for my fiat to reflect, I thought of the urgency to get things and the cost of urgency. The crypto market has come a long way in the last 5 years I've been in it. Crypto's gotten much faster to get in and out and with ALOT more regulation like KYC and AML laws.

So there are trade-offs as we grow as an asset class. Maybe I am being a bit of a millennial moaner wanting my cake to be battered on both sides and be keto-friendly, but this asset class is still pretty archaic when it comes to extracting value.

Store of value or desperation for yield

In these times of economic uncertainty, where governments and the banking system fail us, where the wealth divide continues to grow, many are looking at Bitcoin as a store of value. While others are looking at altcoins and the greater crypto market as a source of higher yields since traditional markets aren't paying much for savers, in fact, savers are losers.

So I can see why there is an attraction to crypto, but when you're chasing returns, do you ever think how you're going to allocate it when you're done? One way crypto has provided a solution was through the introduction of stable coins.

Parked value

Since MOST crypto enthusiasts still make the mistake of measuring purchasing power in fiat like US dollars, we now have a stop-gap solution in the form of stable coins. The "volatility" of perceiving purchasing power measured in fiat has many preferring the perceived stability of a fiat-backed or pegged coin where we can park our value.

Yes, you can park your value there, you can trade in pegged coins, you can earn interest on them, but they are subject to the finalisation of the underlying asset they are pegged to, so you need to consider that loss when factoring in your return. Stable coins are a great way to park value short term or reduce volatility in your portfolio, but it hasn't offered much else but a trading option.

Crypto relies too much on cash flow

One of the reasons why crypto is so volatile is that it relies on cash flow; when a price is steady, it's not because no one is trading but because buyers and sellers are constantly being matched.

If sellers flood the market and overwhelm buyers, the price goes down
If buyers flood the market and overwhelm sellers, the price goes up

But in the end, we're only trading one currency for another and not generating real economic value; we're just rebalancing the books.

Incentive structure negates economic activity

Crypto is still in its infancy so I get why the incentives are focused on financialisation but eventually it needs to get to a point where this value is transferred into the creation and production of goods and services. What good is all this value I have if I can't swap it for things I need.

At the very least we would be getting more stable coin adoption as a payment method. That way I can swap into a stable coin, settle my bill for let's say a meal or an item of clothing and everyone is happy.

If crypto is going to fulfil its promise it needs to start becoming a closed-loop where I don't need to get into fiat but I can acquire goods and services directly in the system. It would make it more efficient not only from a transfer and fees perceptive but from a tax perspective too.

Instead of selling an amount to realise gains, I can trade that amount for something else of value. I think 2021 is the year of DE-FI but 2022 needs to be the year of d-Commerce.