Crypto shorts: stories impacting the cryptoverse
First, it must be noted that the U.S. government has no formal policy on the cryptoverse. Although the halls of Congress have been abuzz with "talk" about cryptocurrency, legislation has yet to make it to the floor for a vote.
At best, the government researches all things crypto (the cryptoverse).
The rapid increase and acceptance of the digital market has banks looking into ways of capitalizing on the space.
Stablecoins have their attention, although last year's Terra Luna debacle caused severe concerns.
Stablecoins must maintain their pegged stability to remain viable. They are less secure than conventional currency, which means they can prove risky.
Although Stablecoins have grown tremendously over the past year, digital assets still seek broader adoption.
Given their uncertain nature and rapid growth in the financial sector, it is essential to remain vigilant and understand that uncertainty will prevail until some form of regulatory oversight is provided.
The rapidly changing digital finance landscape leads the Federal Reserve to explore Central Bank Digital Currencies (CBDCs).
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In a 2022 report, the Federal Reserve depicted CBDCs as a digital version of a central bank's obligation, similar to an electronic variant of conventional banknotes.
Although the Fed has not endorsed a U.S. CBDC, it encourages a transparent dialogue about its potential advantages and challenges.
The Fed has given much attention to the Tether collapse. The sudden run-on-the-bank that revealed the short liquidation is cause for concern.
This was partly due to its commercial papers, which are unsecured, short-term debt instruments used for immediate financing needs.
While common in traditional financing, the need for more available cash-on-hand to handle investors' rush to liquidate is an issue the cryptoverse must address.
DeFi (decentralized Finance) is the vehicle that drives the stablecoin market. It uses a pooled approach, allowing investors to receive tokens for invested funds. In exchange, a specific rate of interest is given.
The DeFi sector of the cryptoverse is unnerving to traditional banking institutes because of its lack of liquidity.
However, the industry sees the potential for significant gains in the digital world of Finance.
They are grappling with tapping into the potential while maintaining stability.
What do banks really think about crypto?
Traditional financial institutions are afraid of cryptocurrency because they cannot control it.
However, they see the digital writing on the virtual wall and realize they must act soon or risk being left behind.
The bottom line is that Central Bank Digital Currencies (CBDCs) are on the global financial horizon.
The question is, will they succeed?
The cryptoverse concerns how a government-controlled digital currency differs from fiat currency.
The short answer is that one is paper and the other electronic, but fundamentally the same.
The global financial market is changing. It will be digital, although how it will look remains to be seen.
The cryptoverse is poised to be a key player in its future, and the educated investor could find financial freedom when it happens.
Crypto-shorts will run through the month of November 2023. It is an effort to bring to light some of the happenings around the cryptoverse that may not be full stories but interesting (maybe developing) ones.
Disclaimer: I am not a financial planner, and therefore do not offer financial advice. I am an avid student of the cryptoverse who is willing to make the things I learn available to everyday people willing to take a chance, change, and explore your financial freedom in the cryptoverse.
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