Bitcoin is smart money, and people who consider themselves smart always want to deal with smart money.
Bitcoin and other altcoins, which can collectively be described as crypto for the sake of simplicity, have a clear advantage over fiat currency.
Crypto is modern, “technological” money, while fiat currency is “traditional”, outdated money.
Based on the assumption that money, either crypto or fiat, primarily serves as a means of transaction, crypto is more advanced than fiat in many ways, for example, as a result of making use of the blockchain technology, and in this sense, crypto well deserves to be regarded as the means of transaction of the future.
Demand and supply laws also apply to crypto
Another important assumption has to do with the fact that crypto follows the same demand and supply laws that apply to fiat money, and is not an exception to these laws.
Advanced technology does not make these laws void.
At this point, the use of crypto as an investment vehicle and store of value enters the picture, and affects its use as a means of transaction.
In order for a means of transaction to be viewed as reliable, it has to be characterized by a high level of stability.
When the price of Bitcoin, for example, fluctuates in the thousands of US dollars within months, then it can’t be described as a stable means of transaction, like the US dollar or the euro, for instance, which only show minor price fluctuations, or remain stable, in the same period of time.
Assuming that the price of Bitcoin becomes more stable in the future, it can then be considered as a “stablecoin”, but right now, when it comes to monetary transactions that need to be immediately completed and require stability, Bitcoin is not a safe option, and unfortunately, Bitcoin’s extreme volatility also sweeps other crypto assets and altcoins along.
Fiat money being country-dependent (centralized) vs. crypto money being decentralized
There are strong and weak fiat currencies, and this heavily depends on whether the economy of the country issuing them is strong or weak, respectively.
For example, the US dollar is strong, because it is backed by a strong US economy.
Crypto currencies, on the other hand, are neither issued nor backed by the government of any country, and that is why they are described as decentralized.
Although decentralization is a brilliant idea and yields many benefits, it also means an absence of backing by a real economy.
However, in spite of this absence, and using a metaphor, it could be argued that crypto currencies are actually backed by the web economy and the global community of Internet users.
Even though this global online community is not a country or a government itself, and is in fact a model for decentralization that is characterized by a high level of heterogeneity, overall, it is a much bigger and financially stronger entity than any single country, state, or other centralized organization, and this is probably where it derives its power and potential for growth from, and that is also the reason why crypto is justifiably described as the currency of the future.
Sources and further reading:
How low can the Bitcoin price go?
Fiat vs Crypto: How Crypto Will Affect Money Printing
