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Why can’t digital currency be exchanged for gold (why digital currency cannot replace traditional currency)?

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Why can\’t digital currency be exchanged for gold? Why can\’t digital currency be

Why cant digital currency be exchanged for gold (why digital currency cannot replace traditional currency)?

Why can’t digital currency be exchanged for gold? Why can’t digital currency be exchanged for gold?

Bitcoin has always been regarded as a global safe haven asset as a means of value storage. However, due to its high volatility, it cannot be traded directly on the market (spot and derivatives), making it difficult to serve as a hedge against inflation. Therefore, if it is used as a speculative investment portfolio or wealth storage tool, it will be difficult to achieve the “break-even” effect, as there are no meaningful price changes that can be retained by investors in this cryptocurrency.

So why is Bitcoin unable to compete with the traditional market? One reason is that Bitcoin is a highly unstable and illiquid virtual commodity. It also has a high risk premium, which can result in significant economic losses when there is excessive returns.

From this perspective, it is not a good idea—even projects like Ripple have issued their own tokens or introduced new tokens through various distributions and transactions. However, these are new products designed and tested independently, not relying on the development work of other projects. But now we can see that many tokens and applications based on blockchain technology are using the Ethereum network and running on different smart contract platforms, and there is no difference between these platforms. (Note: The author of this article is Anthony Pompliano, co-founder of Morgan Creek)

In addition, although the price of Bitcoin has fallen by more than 40% recently, most people still believe that Ethereum is safer than Bitcoin, and some even predict that Ethereum may rise further. Although the transaction speed on Ethereum is currently very fast, as more and more investors turn to concepts such as DeFi and NFT, the growth of ETH will quickly slow down.

Furthermore, for ordinary investors to participate in decentralized exchanges, they must first have the following conditions: 1. Users must first download DAPP software that supports wallet services; 2. Your wallet must have enough time to prepare your ERC20 tokens and various tokens. If you only want to buy BTC and LTC, you will be able to easily convert them into fiat currency. However, for those who want to enter the DeFi ecosystem, they may not understand exactly what DeFi is. For example, you are looking for a DeFi aggregator (DEX) or a protocol (such as Compound). When you choose the protocol, you will see an interface that shows which platform you are using for the USDT/DAI trading pair. Of course, you can also choose to deposit money somewhere and then withdraw it, which can earn returns.

Why digital currency cannot replace traditional currency

Why can’t digital currency replace traditional currency? Looking at the data from the past few months, the prices of Bitcoin and Ether have continued to rise after reaching new historical highs. Now, discussions about the “price difference between Bitcoin and fiat currency” are also heating up in the market.

According to statistics, currently about 40% to 60% of Bitcoin in the market is considered as value-anchored assets, of which only 20% belongs to exchanges, and the rest is primarily funds stored in other exchanges (such as Coinbase), with the remaining portion coming mainly from deposits on trading platforms. This indicates that digital currency, as an emerging technology, does not have a true application scenario. However, these cryptocurrencies have strong characteristics of innovation, disruption, and utility, so their future application prospects are still very broad.

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