Crypto and Currency – Coinstec

The most important feature of a currency is that it be a stable store of value.

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The most important feature of a currency is that it be a stable store of value.

This credo, is vital for a developing country economy to attract the investment it needs. Even in developed countries a stable currency value is the key to investment because those who invest are expecting a stream of future earnings to earn back their investment plus some profit. Instability in currency values mean that an investor cannot accurately predict the value of those future earnings. This uncertainty makes investments less valuable; thus, less investment happens.

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In the past few months the value of a Bitcoin has experienced an average daily change of 2.5% in value, sometimes down but mostly up. For comparison, over the same month, the exchange rate between the euro and the U.S. dollar had an average daily change of less than 1% and only changed 3% over the entire month. While Bitcoin was rising 49% in the past 30 days, it had seven days where its value changed by over 3%, more than the value of the dollar changed in the entire month. People don’t want investments or debts denominated in a currency whose value can change by 50% in a month.

Another important aspect of a currency, beyond being a stable store of value, is to facilitate transactions. Barter on the other hand is not so successful, it’s hard to make change and you must find two people who want to exchange goods; three or four way trades get complicated. Currency solves those problems meaning you can buy groceries without having to sell economic services to the supermarket. This convenience is why people moved from barter to currencies.

Given these drawbacks, the only reasons to own Bitcoins are not to use them as a currency, but to either speculate on their asset value or use them to shield transactions from others. Without a stable value Bitcoin cannot truly be a currency. Rather it is a commodity asset that one trades, like gold or silver, in hopes that its value will rise and yield a trading profit.

Crypto currencies are no question, the future of money and commerce transactions. Most all of the crypto's are deflationary by design. Just by buying and holding, your crypto currencies will grow in asset value.

For conventional currency markets trading in the monies of stable, profitable countries, the fluctuations within the value of each currency is measured in fractions of a penny. Bitcoin values, on the other hand, rise and fall dramatically throughout each trading day, jumping in whole dollar amounts. This means that if you don't have your act together and place a transaction order at the right time, you will lose magnitudes more cash than you would have trading dollars for yen. The value of Bitcoin as a whole, for example, dropped more than 50 percent over the 36 hours after China banned the cryptocurrency. A lot of speculators lost their shirts during that day. And it will almost certainly happen again.