Over the past few months, the world of investments has undergone a sea of change. From the enormous amounts of money being poured into the economies of the developed world in the form of stimulus checks to public spending to support the economy in the face of the covid crisis, the funds that have flooded the financial system have been phenomenal. One area, in particular, has been on the lips of everyone from the neighborhood grocery clerk to the bigshot Wall Street banker: Cryptocurrency.

A quick review: cryptocurrency can be defined as a digital token that is meant to work as a medium of exchange whereas the ownership and exchange of the token are recorded in a blockchain ledger that is secured through cryptography. The idea behind cryptocurrency is rather complicated and as of now, cryptocurrency remains largely in the digital realm. Both the purchase of cryptocurrency and the spending of cryptocurrency take place within the ethers of the internet. Although there are many different forms of cryptocurrency, some of the most popular include Ethereum, Dogecoin, Cardano, and of course, Bitcoin. In addition, there are also a large number of other less famous, and of course, more dubious forms of cryptocurrency. More importantly, all together, these cryptocurrencies have made up one of the hottest areas of speculation in the financial markets in 2021.

While one reason for the incredible amount of volatility in this sector has been the money being sent to citizens all over the world. Another reason for the volatility has been the mania and promotion of currencies by several key figures; most predominantly, Elon Musk. Back in February, Elon Musk announced to the world via Twitter that Tesla motors would begin accepting bitcoin as a payment option. This, of course, sent the price of bitcoin rising as many people believed that it presaged the acceleration of the adoption of bitcoin for payments by other firms. Another recent piece of news has been the adoption of bitcoin as an official national currency by the country of El Salvador. Bitcoin supporters as well as other cryptocurrency evangelists once again pointed to this piece of news as an omen that other nations would soon follow, thus boosting up the acceptance and value of cryptocurrencies in the market.

However, the reality about the acceptance and usage of cryptocurrency has not been clear. The proliferation of many various “memes” or joke cryptocurrencies point to the increasingly speculative nature of the crypto market. Although initially promoted as an alternative currency that would not be subject to the whims or policies of national governments, cryptocurrencies have proven to be very vulnerable to both monetary policies as well as restrictions being placed to limit their usage. In the United States, as well as China, and South Korea, governments have continued to exercise their right to regulate cryptocurrencies by demanding that the platforms on which cryptocurrencies are traded report not only the amount of cryptocurrency being traded but also the names of individuals. Further restrictions in the future may involve reigning in the mining of cryptocurrencies due to their large consumption of energy as well as real-name IDs for all trades to prevent illegal usage of cryptocurrencies. For all these reasons and more, cryptocurrencies remain the Wild West of monetary instruments and only time will tell if a future standard will emerge from the plethora of cryptocurrencies that currently exist.

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