So Fed Taper Has Nothing To Do with Cryptocurrencies

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3 years ago

Fed announced to taper bond purchase. The cheap money era may end soon and the Wall Street party may die down. However, why cryptocurrency may drag by the Fed tapering is a challenge we will face.


Free money era

The COVID financial crisis explores the weakness of the current financial system. The speed of money and the speed of money supply were slow. Another part of the reason for cheap money is that the Fed wants to maintain the current asset price level to prevent further crashes of the market. However, the trade-off is being the uncontrollable high of the inflation rate to make living harder. 


Party with a price

The free money party has a cost. Too much money makes the money cheap while making other products more expensive. It damages the money valuation in the long term and makes people distrustful of the government. The flow of money eventually still goes to the rich that costs widen the wealth gap and makes the system more unfair. 


Cryptocurrency is a solution

On the other hand, cryptocurrency becomes a speculated asset to hedge the uncertainty of the future, especially toward the free money policy. Particularly Bitcoin was designed to prevent the government careless of printing more money to rescue big corporations during each financial crisis. It becomes a norm for free money policy to let the government issue money if they decide to do so. With an unclear resolution of the decision, it makes people nervous about their own future and cryptocurrency is a way to ease the concern.


A different path of the crypto

Bitcoin represents the beginning of the idea of cryptocurrency. It is the milestone of the first crypto generation that makes self-sustain financial systems viable through the internet. Ehtereum is the second generation of cryptocurrency which embraced the digital norm and becomes part of the internet. Two different aspects of crypto philosophy will be apart from each other from now on.


Bitcoin path: battle with the existing system

Bitcoin’s way is to check and balance the existing financial system. Institutional investors are looking to control Bitcoin along with big corporations, while individual investors are preventing such control from happening. It is a battleground between the two and the traditional financial system will influence Bitcoin and vice versa.


Ethereum path: create a new future

Ethereum has its own mission to create a new world. With Defi and NFT, Ethereum has its own marketplace and can apart from the existing financial system to survive in its own way. Ethereum is more digital norm than Bitcoin did. With the idea of Metaverse, Ethereum can easily adopt the new era and becomes a leader in the digital universe. 


Is there a third way of the path

I believe that there will be a third way of the path in the future. However, it has not yet come out and many other projects are derivatives of the previous two paths.


In conclusion

The Fed tapering may try to deal with the inflation issue, but people have done with the existing financial system. It is time for people to have an option for building their own future.


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