Why are Digital Assets and Cryptocurrencies so Popular?

Bitcoin launched in 2009.

No one really knows exactly who the actual architect or architects were behind this digital currency. This person or group has somehow managed to remain anonymous all these years.

When it launched in 2009, one Bitcoin was worth $0.

As of today, one Bitcoin is worth $38,461.20

Bitcoin was the first “digital currency” to gain traction. This whole movement really only started to grow 12 years ago. Just to be clear, digital currencies are also referred to as “cryptocurrencies.” As of January 2021, according to Investopedia, there are now around 4,000 cryptocurrencies. Cryptocurrencies don’t have anything tangible tied to their value and they are all completely housed online.

So, how did we get here?

Obviously, we had to have computers for this phenomenon to begin. But, 4,000 new currencies in 12 years seems intense. To understand our current situation, we will first look to Frederick Kaufman and his new book “The Money Plot: A History of Currency's Power to Enchant, Control, and Manipulate.”

In this book, Kaufman attempts to create a greater understanding of money by enveloping the entire concept of “money” inside of the morphing concept of language. It’s a very interesting way of trying to help people wrap their minds around the deeper meaning of “money.”

Kaufman says, “What we call money, what we consider finance, and whatever theory we propose about the economic system as a whole – all of these reflect our moment in time. Which is another way of saying that money conforms to the fictions of the age…”

To make this relevant, just understand that "money" is equal to something of “worth” that can be traded for something else. This originally took shape as carrying around bones, shells, seeds, or precious stones. It eventually morphed into gold and silver coins, then became the fiat money of today’s systems.

In the 1870’s the idea of a “gold standard” became popular. This meant the government could issue paper money and coins as a symbol for the gold that they had stored elsewhere. Governments were, for a time, required to have enough gold to back up the paper money they issued. Then, they weren't. But that's a story for another day.

We know that money is anything that a group of people choose ascribe value to and use to trade for other valuable things. Systems of money are currencies and for a long while, governments controlled the common currencies.

The idea behind digital currencies came about as people lost faith in the government’s ability to regulate fair and lasting currencies. And, that is exactly why these cryptocurrencies are gaining popularity today. If people stop trusting their government regulated currency, it loses value. If it’s losing value, it isn’t doing the thing that people expect it to do.

But, just as increasing faith can cause a system of money to grow, you also have the opposite happening as well. In fact, there was an article that came out on June 21st of this year from CNBC where the “Mad Money” host Jim Cramer explained that he sold almost all of his bitcoin because of China’s crackdown on bitcoin miners and the recent ransomware attacks in the US.

Yet, now there are plenty of digital currencies out there to choose from. It will forever be our reality that the only thing ascribing value to a digital currency is the people who invest in it and decide it has value.

These currencies currently remain free from governmental control, which some investors clearly desire. However, they are also completely reliant on people buying into the idea of them. That makes them pretty much like any other kind of currency that has ever existed.

Bitcoin seems safe right now, as Paypal has even decided to allow users to pay for things using the cryptocurrencies Bitcoin, Litecoin, Ethereum and Bitcoin Cash.

Kaufman is correct when he says that money represents the “fictions of the age.” The stories of our age and time are leading us to have more trust in digital currency and less trust in fiat currency, but that doesn't mean this bubble will last forever.

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