02/11/2021 - Economy

KEY POINTS

·        Bitcoin and other private cryptocurrencies have been on a bull run recently. Unlike previous rallies, the current rally in bitcoin has witnessed the increasing participation of retail investors in India.

·        The most important feature of cryptocurrencies that is flaunted by their enthusiasts is their limited supply.

·        Stocks and bonds, for instance, possess exchange value that is based on the expected future cash flow from these assets.

·        Commodities such as oil and steel possess use value because these assets are used to run vehicles and build real estate.

·        The monopoly that governments (and central banks) possess over the issuance of money is at the root of their power and influence.

·        This allows governments to fund their budget deficits, particularly during times of crises such as the current pandemic when tax revenues have taken an unprecedented hit.

·        In essence, monopoly control over money allows governments to indirectly tax citizens by increasing the supply of currencies, thus devaluing them.

·        China recently imposed a complete ban on all cryptocurrencies and plans to issue its own central bank-issued digital currency.

·        Private alternatives to fiat currencies offer people greater choice in what currencies they choose to use as a medium of exchange.

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