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Ethereum Protocol – the Markets’ Darling

Ethereum has been created as a complement to Bitcoin, however, it developed into a shiny competing protocol. Blockchain technology is considered the heart and soul of fintech. The question that is being asked by any crypto enthusiast is—which came first, the chicken or the egg—refers to Bitcoin and blockchain.

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Indeed, Bitcoin has developed into a store of value and medium of exchange or a currency with a libertarian twist. Meanwhile, Ethereum embodies the most attractive attributes of blockchain as transactions are far faster and efficient on the Ethereum network than on Bitcoin’s.

As fintech continues to revolutionize the financial world, reducing settlement times on transactions from days to seconds or even shorter, the Ethereum protocol’s value has grown. The ascent of the Ethereum token and its outperformance compared to Bitcoin over the first half of 2021 reflects the value the market is placing on the cryptocurrency with the second-highest market cap.

While Ethereum’s efficiency explains the recent performance, the price action is enough to validate its value.

Bitcoin’s danger to governments becomes less relevant, while Ethereum’s is rising

All cryptocurrencies are a threat to the government’s control of the money supply. Controlling the purse strings is a critical component of power over the masses. Cryptocurrencies are a libertarian means of exchange. A libertarian philosophy seeks to maximize autonomy, political and economic freedom, remove power from governments, and return it to individuals. The central bank and government control of the money supply run counter to libertarian theory.

Therefore, Bitcoin and Ethereum pose a threat to governments. Cryptocurrency prices are a function of the bids and offers for the tokens, nothing else. They have limited supplies, while governments can print fiat currencies to their heart’s content. 

Though governments shroud their policy decisions to expand or contract the money supply with explanations of “stability” or “stimulus,”  it all comes down to control. The cryptos reflect a free-market approach to money without government interference.

We are likely to hear negative comments from governments rise with the market cap of the cryptocurrency asset class as growth comes at the expense of fiat currency’s role in the global financial system. The recent hacks and ransom payments from Colonial Pipeline and JBS, the energy and meat packing companies, will serve as fodder for the government to challenge cryptocurrencies for their nefarious uses.

Governments will strive to increase regulations and control over the cryptocurrency market. They will eventually issue digital currencies they can control using fintech innovations within a framework that achieves their goal of controlling the money supply.

Meanwhile, Bitcoin has been in the crosshairs of governments, but that focus could shift to Ethereum. It is a more robust protocol, achieving market acceptance because of its speed and efficiency, making it a potential target for government regulators and legislators looking to maintain the status quo.

 

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