Why do currencies pose risk warnings (Why do currencies cause economic crises)?

08/13/2023 13:23 • Metaverse Matters • 111 views

Why do currencies pose risk warnings? According to Sina Finance News, recently there was a question about the price fluctuations of Bitcoin and Ethereum in a certain community.

How did this question arise? Why do currencies pose risk warnings? We can find the answer from the following chart:

First reason: Although many digital assets are developed, issued, and circulated as tokens based on blockchain networks (such as ETH, LTC, etc.), they are not licensed or authorized by national regulatory agencies, which means they cannot be traded or transferred. These cryptocurrencies usually do not undergo strict supervision or restrictions like any other type of investment; and over time, this situation may change. Another reason is that these cryptocurrencies themselves have high security and anonymity, making them easily used by criminals for illicit activities such as money laundering. Therefore, measures are taken to avoid these illegal activities. So when people think they have invested in a certain type of digital asset, it has a significant impact on their investment behavior.

Why do currencies cause economic crises

According to CCN, recently US President Trump stated that an economic crisis is imminent. And when this situation occurs, the emergence of currency will cause a catastrophic financial revolution: If people buy things (such as gold) with their money, they will lose all their cash; assume a person owns 1 US dollar’s worth of Bitcoin and 10 Ethereum at some point.

Why is this the case? Because after the international financial crisis of 2008, central banks around the world have been constantly printing money and devaluing it. Therefore, many countries have started to invest or invest heavily in digital assets, but these countries do not really understand what digital cryptocurrencies are. All of this stems from the “value storage” mechanism brought by Bitcoin and its underlying blockchain technology itself, that is, issuing a stablecoin through algorithms that enables anyone to access funds and store information anytime and anywhere.

Since it is essentially a legal tender rather than a cryptocurrency, currency should not be considered as a means of payment or exchange medium, but needs to function as a medium of exchange to provide liquidity and price stability.

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Why do currencies pose risk warnings (Why do currencies cause economic crises)?

Why do currencies cause economic crises

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