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.
