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The Markets Before Crypto and After Crypto

Market crypto

November 19, 2020 | 

JOHN K MWANIKI |  1 Comments| 

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The current financial scene is way different from what was available a decade ago. Before, the world relied on fiat currencies. The government, through the central bank, would determine supply and manage inflation.

Everything changed when Satoshi Nakamoto released Bitcoin a decade ago. Blockchain-based currencies have revolutionized the world in several ways. It has given transactions and other exchanges involving money a new outlook.

This analysis compares the period of the markets before cryptos and after. In the end, you should be able to understand the impacts of digital currencies.

Market Safety

Money doesn't come easily. People have to work a lot to amass wealth over a long period. For that market, safety is essential for all traders. It is one of the critical considerations before placing money in any venture.

Cryptocurrencies have come under scrutiny for market safety. The whole premises are online-based. Like all online ventures, they are susceptible to hacking and other cyber attacks.

Several traders have lost money on crypto exchange hacks. This had led to the introduction of insurance policies.

Others also provide for cold room storage of cryptocurrencies. The exchanges have two-factor authentication access to avoid reach by unauthorized individuals.

Cryptos still have more to do in regards to safety. This is different from the markets before cryptos with assured security. All financial transactions underwent scrutiny to ensure safety.

Regulation

Regulation has been part of the markets since forever. The centralized markets before cryptos meant strong government directives. The government, through regulatory bodies, had clear guidelines for all entities. The central bank would print money. Commercial banks' role was to ensure supply.

The government would also provide for regulations on financial transaction service providers.

The decentralization of cryptos changed all this. Digital currencies don't rely on any single authority. It doesn't also play by any rules. It only has a whitepaper that dictates the growth, supply, and every other thing.

The decentralized nature of cryptos means they are easy to start operating in. Still, there is the challenge of scam risks. Several traders have already lost investments.

Governments are now in the process of introducing regulations to the cryptocurrency markets. They are ensuring consumer protection while the coins become mainstream.

International Trade

The introduction of virtual currencies has affected international trade. The markets before crypto had an imbalanced international trade. A few countries would control the whole world in the form of superpowers.

The USD is the world's reserve currency. Most of the world's transactions thus happen in the dollar. Several other countries also have the dollar as its reserve.

Several USD use cases give the USA an upper hand in international trade. The US can put economic sanctions on any country it deems to misbehave.

The introduction of cryptocurrencies is changing the overreliance on the USD. Already some countries are considering changing their reserve from USD to Bitcoin. Other countries are also using the cryptos to evade economic sanctions.

Cryptos have introduced a liberal market with no superpowers. Its success changed international trade giving chances to all countries.

Ease of Starting to Trade

Both the crypto and fiat currency world have trading options. The crypto exchanges don't need a lot to start trading. The decentralized nature allows one to open up a platform without too much concern.

Trading in the crypto exchanges is also relatively easy. One doesn't need to undergo any documentation process. It's only a matter of declaring interest in the market. You then get access to the various commodities.

The new operations are not the same in the markets before the cryptos. The traditional currencies markets have several underlying rules. The exchanges have to undergo several checks before authorization. They have to show authenticity and customer protection. They also need to undergo regular inspections to ensure compliance.

The markets before the cryptos were thus harder to start trading in. The process is costly and cumbersome. It yet comes with several advantages to customer protection. It is for these reasons that the crypto exchange guidelines are becoming stricter.

Soon crypto exchanges would start providing whitepapers before trading. They will use similar rules as those of the traditional stock markets.

Transaction Speeds

Transaction speeds are essential for the money markets. People want access to their money as fast as possible. They would prefer to have it instantly.

Bitcoin and other cryptocurrencies have revolutionized international trade transaction speeds. The markets before cryptos came with hectic cross-border transactions. People would wait for 3-5 business days for the transfer of funds to process.

While financial services like PayPal improve speeds, they came with higher costs. Users had to spend more on a similar amount. That explains some of the reasons for massive crypto success.

Cryptocurrencies provide for faster cross-border transactions. They don't involve any exchanges, as the same Ethereum is available all over. Like all other cryptocurrencies such Ripple.

The only concern is on instant transaction speeds. The cryptos have to do more to edge Visa and other payment options.

Illegal Transactions

The use of cryptocurrencies for illegal transactions has been an issue since the start. Several quarters accuse the coin of aiding illicit transactions like money laundering.

The claims are that crypto transactions are anonymous and untraceable. The accusations are turning out to be myths. The crypto transactions happen in the blockchains which have ledgers. The public ledgers record all transactions and are accessible by anyone. Also, the miners have to verify all transactions. They can flag off any malicious transaction.

The other argument is that illicit transactions are not a creation of cryptocurrencies. The illegal markets before cryptos were still as prosperous.

It turns out it's the mainstream banking system that's supporting illegal transactions. They tend to blame the crypto world for deflecting the blame. Attention goes to scrutinizing cryptos as they operate with the market trust.

Cryptocurrencies support less than 1% of all illegal transactions.

Bottom Line

The markets before cryptos contrast to the current crypto economy. The world before had regulations and was centralized. The current crypto market is free for all. It allows several countries with better growth opportunities.

The only concern is security. Still, it would be all okay as regulations come up.

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sara hatsume
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