The famous “Gold Fever” refers to a charismatic period of world history, carried out in 1848, in the State of California, in the United States of America (USA). It translated into an influx of people looking for their share of gold, after huge reserves were discovered at Sutter's Mill.
It is estimated that 300.000 people moved to the vicinity of the site during the “Gold Fever” period. By August 1848 there were 4.000 miners in the area, and such was the interest and the expectation of promising results that by 1853 the number of miners had multiplied 62,5 times to 250.000 miners. During the “Gold Fever”, around 340 tons of gold were extracted.
In modern times, the “Fever” continues, but now gold has another name: Cryptocurrency.
This is the “Cryptocurrency Fever”, with Bitcoin and Ethereum on the main stage, and hundreds of other “altcoins” (alternative cryptocurrencies) fighting for a prominent place in the limelight.
Let's talk about money.
Money, nowadays, is a piece of paper or metal (coins) or, often, just a number on a screen, which represents a certain associated value, and which is accepted in commercial exchanges in society, whether in the form of Euros, Dollars, Yen, Rubles, etc.
In not too distant times, however, commercial transactions were carried out using rare minerals, which were accepted as a form of payment. Salt was also widely used as payment in Roman times, hence the term “salary”. Later, gold, as a rare mineral, was recognized and accepted as a form of payment.
Payments, for several centuries, were made using gold or gold coins, whose value was represented by their weight.
Later, paper money was introduced, as an innovative measure to facilitate commercial exchanges, with the value of paper money being fully reflected in a certain weight in gold, which, in turn, was kept in bank vaults - the paper represented an amount in gold.
Next, we have the fiat money monetary system, which is currently used, where paper money, in itself, has no intrinsic value, nor does it represent any amount of gold, and was introduced to a large extent due to the obvious scarcity of the mineral and in the face of serious concerns about the disruption of the representative system in gold.
Its value is determined by the game of supply and demand in international markets (ie a lot of demand for Euros, without the introduction of more units of currency in circulation, will make its value increase; or on the other hand, if demand remains constant and more units in circulation are introduced, their value will decrease) and exchange rates issued by government entities.
Now, it is known that successful transaction money has six fundamental characteristics: scarcity, divisibility, utility, transportability, durability and potential for counterfeiting.
Considering the attributes of the technology used and the way in which the main cryptocurrencies operate, we have to meet these characteristics to a large extent, placing them on a level that favors them in the sense of occupying a prominent place in the international economic sphere, as a means of payment .
Therefore, and assuming the characteristic cryptocurrencies that lead many to connote them with the term “free currency”, and since they do not depend on international institutions to control transactions (decentralized finance), they are seen as the solution of the future for the international monetary system.
And as such, the new “Gold Fever” is being personified by the cryptocurrency Bitcoin and Ethereum (the two views with the greatest potential to become the international reference due to the technology they use).
Other alternative currencies like the Doge (initially created as a joke), but thanks to figures like Elon Musk or Mark Cuban, who became interested in the project and are moving efforts to improve the technology so that it can be, in fact, used for transactions, cause the interest triggered internationally in cryptocurrencies to have grown at a dizzying pace in the last three years.
More: there are more and more businesses (cafes, restaurants, stadiums, services, etc.) accepting payments in cryptocurrency and, to substantiate and, frankly, consolidate its definitive adoption, we have the fact that even governments, such as the USA, Russia , China (among others), are developing their own form of cryptocurrency (“Govcoins”).
This does not mean that governmental currencies will be adopted, but it is, frankly, a strong reflection of the importance of this new monetary system, which is having such an impact that governments of international powers were impelled to develop something similar, in an attempt to maintain some control over domestic monetary policy. The future will tell whether or not you will succeed.
Fact is, cryptocurrencies are here to stay. We are going through a very interesting phase of development and adoption of an innovative monetary system.
However, I am confident and expectant about the news that the future will bring and I watch with enthusiasm the change in the international economic sphere.
Author Luis da Ponte is an effective member of the Order of Economists.
He has a degree in Business Management and a postgraduate degree in Corporate Finance from the University of Algarve and a degree in Public Administration from the University of Minho.
Professionally, he is the owner of the companies “VDP – Consultoria | Insurance” and “TSE Industrial”.
Note: article published under the protocol between the Sul Informação and the Algarve Delegation of the Order of Economists
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