This article was originally published in The International Business Review Volume 159 in October 2024.
In the right corner, we have the traditional fiat currency, based on a debt-based system hatched from the Nixon Shock of 1971. It’s the man on the dollar, the paper that beats gold, it’s the world’s reserve currency…. none other than the mighty American Dollar.
And in the left corner, we have the digital saviour, built on the decentralised system of cryptographic mathematical puzzle (Hash). Coded by the anonymous Satoshi Nakamoto (or was it a group of hackers?), and has been online since 2010, birthing the Web 3.0. It’s the father of countless magic computer money, it’s the beacon of hope for a truly free market…. presenting the enigmatic Bitcoin.
With the Bitcoin “halving” next scheduled for 2028, the excitement for the “bull run” and the prospect of skyrocketing “to the moon” with a potential of 100X gains, is palpable and intoxicating for crypto investors and traders. Adding to the fervour is the exodus of nations shifting away from the Dollar, whether to circumvent the imposed sanctions or the optimistic position of hedging their assets against the reckless printing of The Federal Reserve. Many of the members of the BRICS (Brazil, Russia, India, China, South Africa and others) are searching for a greener pasture in their efforts of dedollarisation.
Perhaps it’s time to highlight the two contending fighters and weigh out their odds. Which one of these “seashells” are capable of winning the belt and be crowned as the new world champion?
| CURRENCY | FIAT | CRYPTO |
| The Big One | The American Dollar | Bitcoin |
| Date of inception | July 1971 | December 2010 |
| Creator | The Federal Reserve System (US) | Satoshi Nakamoto (anonymous) |
| Reason for creation | To secure the dominance of the American Dollar against the growing global discontent of the Bretton Woods “asymmetric financial system”, established after the Second World War, which notably favoured the Western victors. | The free market’s response to the 2008 economic big banks bailouts and the ensuing global recession. A solution in an alternate financial ecosystem that operates beyond the reach of the too-big-to-fail institutions. |
| Foundation of valuation | The trustworthiness and credibility of the central banks issuing the legal tender and authorised by government regulations. | – The fixed amount of Bitcoin to be mined. – The cryptographic maths puzzles which the miners need to solve in order to be rewarded with Sats. – The transparent Blockchain ecosystem and its immutable public ledger. – You are your own bank, with full ownership and responsibility. |
| Pros | – Supported by most governments around the world. – Accepted and used as the primary medium of exchange. – Available in both digital and physical transactions. – Provides governments with flexibility. – Price stability. | – Hedge against inflation. – Fixed amount of 21 million Bitcoins to be mined, absolute scarcity. – Low to no transaction fees. *(Depending on the crypto) – Based on the ironclad Blockchain system with the self-enforcing and self-executing “smart contracts” on the public ledger. – The impossible-to-forge private keys of your wallet and crypto assets serving as the digital signature to mathematically guarantee the validity of the transaction. – Decentralised and independent from the meddling hands of central authority, a truly open free market dictated by the demands of the people. – Potential big gains since the crypto ecosystem is still in its relative infancy (like the internet in the 90s). – Pseudo-anonymity of the users (both a pro and con). – Accessible to anyone with an internet connection. – The creation of Web 3.0, a new network free from the gatekeepers of the internet. |
| Cons | – Not backed by real valuable commodities and entirely based on trust and faith in the institution. – Gives central banks total control over the economy. – Prone to (hyper)inflation with reckless printing. – Creates opportunity for bubbles (i.e. Mortgage crisis of 2007) – Exposed to corruption and manipulation from power abuse. | – Available only in digital form. – Not widely accepted yet – Volatility of price, no minimum valuations and vice versa. – No helpline or customer support. All crypto transactions are irreversible. Losing your private keys will result in losing your access to your investments. (*unless parked on the central exchanges) – Little to no regulations from governments. Scammers’ heaven due to the lawlessness of the ecosystem. |
| Special moves | – Fractional Reserve Banking. – Evolution to CBDC to compete with Crypto. | – Possibility of making generational wealth. – Absolute financial freedom. |
| Criminal record | – The International Debt Crisis 1982. – The Russian Economic Crisis 1992-1997. – The Latin American Debt Crisis 1994-2002. – The Asian Tiger Economic Crisis 1997-2001. – The Global Economic Recession 2007-2009. | – The Silk Road Crash 2011. – The 2013 Boom & Sell Off. – Mount Gox Exchange Hack (February 2014). – The 2017 Boom & Sell Off. – The 2020 Pandemic Crash. – Sam Bankman-Fried (SBF)’s FTX Exchange Fraud (November 2022). |
| Other associated currencies | Every other nation’s currency with the exception of Salvador and other BRICS members | – Ethereum – Ripple XRP – Litecoin – Bitcoin Cash – Cardano ADA – ChainLink – PolkaDot – 20,000 more coins and counting. |
Kicking off The Dragon year of 2024 with a bang, Bitcoin is coming in strong after a steady rally of 152% in the previous year. The anticipation is high for “halvings”, a locked-in feature set to reduce the reward of Sats (smallest unit of Bitcoin, 1 Satoshi (Sats) = 0.00000001 BTC). This reduction is expected to increase scarcity, potentially propelling the price upwards in a satisfying green candle.
Following the painful red year of 2022, marked by Do Kwon’s self-inflicted failure of Luna Crash and Sam Bankman-Fried’s questionable financial practices at the FTX exchange, 2023 provided a welcome contrast with a stable, albeit dull, ascent. An ordinary year for crypto bros who are used to daily price fluctuation of 10-30 percent, and battle-worn by 50 percent gains/losses that would give the Wall Street bros either a heart attack or a hard-on. Now, all eyes are on the “Whales” (wallets with above 1000 BTC) and major investment firms, including BlackRock, Grayscale, Valkyrie and others.
Their collective anticipation was amplified by the decision of the US SEC (Securities and Exchange Commission) to approve the Spot Bitcoin ETF (exchange-traded fund) on the 10th of January. It is starting to look a lot like the flight of the mythical beast.
On the flip side, the Fed Chair Jerome Powell finds himself juggling the difficult task of keeping the Fiat/US Dollar afloat amidst the worst inflation breakout in 40 years. To counter this, Powell has raised the interest rates several times within 2023 alone. According to Reuters, Powell’s monetary policy has effectively tamed inflation at a faster pace than expected, skirting the recessions that many had anticipated. Although the Fiat currency may be severely injured and limping, the resilient Dollar refuses to go down without a fight.
For the first time since 2022, policymakers did not use the phrase “unacceptably high” to describe inflation. A majority of policymakers are hopeful by the projections issued at the Fed’s December meeting, and are expecting it trimmed by at least three-quarters of a percentage point. The target rate has been held in a range between 5.25 percent and 5.5 percent since July. Despite growing hopes of a “soft landing”, the market sentiment still lingers on the possibility of hitting a breaking point and bursting the bubble. This apprehension is fuelled by the uncertainty of the upcoming American presidential election and tense polarisation of the society.
Bringing the focus closer to home, Statista projected that the revenue of cryptocurrencies market in South East Asia will reach US$1.787 million in 2024 and an annual growth rate (CAGR 2024-2028) of 8.75 percent resulting in a projected total amount of US$2,499 million by 2028. They also expect the number of users to reach 106.20 million users by 2028. Cryptocurrencies are so popular in this region that even MasterCard partnered with the leading cryptocurrencies exchanges in the Asia Pacific and launched their own crypto-funded MasterCard payment cards in late 2021.
The high demand for alternative mediums of exchange in the East is not surprising, particularly given the daunting prospect of China’s digital Yuan, encouraging the other nations to explore the development of their own sovereign digital currencies (CBDC). Many Asians view crypto as a resistance against the potential implementation of a dystopian social credit system. Additionally, the region is also home to the largest number of underbanked and unbanked populations, making cryptocurrencies a more preferred choice to navigate around the usual bureaucratic hurdles imposed by traditional banks.
As history demonstrated time and time again, the medium of exchange has undergone multiple transformations, adapting to the evolving needs of the market and the governing bodies of the nations. From seashells to precious metals of gold and silver, from papers to plastic, and now crypto. The evolution of money is an undeniable reflection of our technological progress. Stifling the next step could deter potential innovators and investors. Personally, we would advocate for embracing both traditional and emerging forms of currency. All monies are beautiful. Nevertheless, it’s crucial for individuals to exercise due diligence and follow the principle of “DYOR” (do your own research) before going “all in” and “ape out” into any stocks or crypto assets. In the world of finance and investment, critical thinking and independent research are essential for making informed decisions.
“Don’t Trust, Verify.”
Satoshi Nakamoto
