Could Cryptocurrencies Decrease Demand For Mined Commodities?


For a long time, cryptocurrencies weren’t taken too seriously beyond a certain community of insiders and enthusiasts. They took a while to make it to the mainstream, and even when they did, wild fluctuations in value, questions of utility, and long-term doubts kept them from being too widely embraced.

Now, though, cryptocurrency is experiencing a spectacular recovery, with bitcoin leaping over the $10,000 mark and cryptos more broadly starting to seem somewhat more stable. This does not at all mean that there won’t be more fluctuations or even outright crashes in the future. But the last several months have been some of the steadiest in cryptos’ short history, which is lending them more legitimacy. And when you factor in the point that most people now see cryptocurrencies as commodities (as opposed to forms of currency, which they technically are), it’s worth asking whether or not they could actually lead to a decrease in demand for traditional, mined commodities, from oil to gold.

For one thing, now that cryptos are looking more stable, talk of their potential use as hedges against currencies and stocks is picking up once more. Historically speaking, many investors have looked to valuable commodities (mostly gold, to be fair) as safe stores of wealth during market crashes or times of financial decline. As stocks and currencies fall, commodities stay level, or even rise – or at least, that’s the general expectation. It’s by no means a concrete rule or provable inverse relationship, but it’s still something a lot of people consider, and they’re now doing so with regard to cryptos. It therefore stands to reason that a certain portion of investors could ultimately buy up cryptos as hedges (whether or not this is a good idea, which we can’t say) instead of some more traditional commodities.

Practical use is also becoming more of a factor. As mentioned, questions of utility were among the reasons cryptos weren’t initially taken seriously. However, they’ve slowly become more useful in a variety of markets, which only boosts their overall viability. Most notably, more and more online retail sites are accepting cryptos for purchases – including Amazon, though this is done through clever third-party vendors (who take in your cryptocurrency and buy goods for you with cash). Cryptos are also making potentially lucrative in-roads in betting and gaming businesses online. Traditionally casinos and bookmakers deal with credit cards and PayPal, and some post free betting options as well, but there’s been a slow-but-sure arrival of prominent cryptos in these markets as well. Throw in travel booking sites, food vendors, electronics sellers, and independent shops, and there are now quite a few places for people to spend cryptos. This doesn’t directly impact other commodities, but again, it increases viability and makes cryptos all the more appealing as alternative investments.

Cryptos may also appeal to some investors who are concerned with ethics, accountability, and sustainability. You may have read here just recently about Zambia upholding its laws regarding mining firms, and this is indicative of a greater focus on accountability in related industries in general. Historically speaking though, it’s only fair to acknowledge that mining practices have often raised questions of ethical practice and accountability, and more recently, environmental responsibility. Now, cryptocurrencies are not completely clean in all of these areas either; specifically, the process of digitally mining such currencies can consume a great amount of energy, and is thus not the most environmentally responsible practice. Nevertheless, cryptos may seem to many investors like more responsible alternatives to ordinary commodities.

We don’t have an exact answer at this point for the question posed in the title to this piece. However, it’s the developments and concerns outlined above that make the question worthwhile to ask, and it could well be that as we move further into the future, growing demand for cryptos could decrease that for other, mined commodities.


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