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Humanity has used many materials as money throughout history, from the barter economy to the present. It is known that we have used precious metals, objects, papers and even seashells as money since the beginning of civilization. However, with technological developments and globalization, new inventions, discoveries and terms have entered our daily lives. Naturally, it is inevitable that these changes will also appear in the economic system. In this context, especially after the 1990s, the development of Big Data and artificial intelligence (such as OpenAI) has brought a new type of money called cryptocurrency to our lives.
At this point, apart from the definition and the impact of the US Presidential elections, we will evaluate whether cryptocurrency could be replaced with the traditional paper money system in the future or whether it can be used as money. In order to achieve this, we need to understand the role and use of money throughout history. It is clear that if you see this concept as a way to get rich in a short time, you do not need to read rest of the article. Because in this analysis, we will not give any investment advice, but we will discuss the definition, historical development, future and Trump effect of digital moneys.
Naturally, it is known that discussing the future role of the traditional monetary system and cryptocurrency is a very complex subject. The way to understand these phenomena is to consider globalization and technological developments together. Moreover, it should be said that even if you have a strong infrastructure and system for this new digital currency, you need to ensure that people and the community believe in it and trust it. Because a currency has no chance of surviving for a long time unless there is trust and belief in it.
Cryptocurrency and Bitcoin
Even though idea of electronic money dates back to 1980s, Bitcoin (BTC) just started in 2009 by its creator Satoshi Nakamoto. “In short, a cryptocurrency is a virtual coinage system that functions much like a standard currency, enabling users to provide virtual payment for goods and services free of a central trusted authority. Digital moneys rely on the transmission of digital information, utilizing cryptographic methods to ensure legitimate, unique transactions.” (Farrel, 2015)
“Cryptocurrency can be defined as a digital asset which uses cryptography in order to secure and verify transactions, as well as regulate the number of units in circulation. Digital money concept has been considered unique in nature, as it is the first type of “currency” to utilize a sophisticated type of cryptography, referred to as the “blockchain”. The blockchain functions as the primary means of verifying transactions and upholding the currency’s legitimacy, utilizing a proof-of-work algorithm” (Chohan, 3).
According to Douma (2016) despite the fact that the European Central Bank doesn’t take BTC as a currency, it still insists that European Central Bank is responsible for the impacts of BTC and its usage especially in Europe economic zone. At the same time with European Central Bank. the European Banking Authority also says, “the usage of the term ‘currency’ is misleading for several reasons, including the insinuation that it is therefore exchangeable against other currencies, which may not necessarily be the case”. Considering all these considerations, it seems that Donald Trump, who won the elections in the USA and will take office as the 47th president in January 2025, will do her best to provide a legal basis for these new digital currencies.
Trust and Regulation Problem
When it comes to money, you will appreciate that; as with almost all financial instruments, trust, belief and legal regulations have a very important effect on the currency. If a currency does not have a legal infrastructure, public trust and belief, it will probably not survive in the long term.
The reason why most people trust and believe in the fiat currency system is obvious. We know that fiat currencies are issued by central banks and are mostly backed by states. Moreover, being issued by a central bank and backed by a state makes fiat currencies “real money” for humanity. Unfortunately, it is clear that cryptocurrencies do not yet have enough public trust and belief. Since they are not backed by a state and not issued by a central bank, people generally see these digital currencies as unreliable, even speculative investment vehicles.
On the other hand, BTC is currently very young, but it stands out as a type of currency known worldwide compared to other altcoins and coin types. It is clear that it will be even more popular in 2025 due to the effect of the US election results. Although BTC is not yet as widespread as traditional currencies and not as widespread as other international currencies, regulatory measures will be needed. In this context, it is worth noting that there are countries in the European Union that have not taken an official stance against Bitcoins and other virtual currencies, but as altcoins continue to become more popular, it is clear that more countries will begin to establish their own policies to regulate virtual currencies.
Future of Cryptocurrency
As we have discussed before, it is well known that Cryptocurrency has many disadvantages in terms of gaining widespread acceptance, at least for now. Usually, in financial matters, it can take a long time to get people to trust you. Due to the high volatility of the value of digital moneys-Bitcoin, the lack of a state or bank guarantee behind it, and the fact that it has not yet been widely accepted by society, we can easily say that digital currencies cannot take on the role of the traditional monetary system in a global sense, at least for now.
On the other hand, it is an obvious fact that cryptocurrencies have attracted great public attention in recent years. Especially western governments, universities and NGOs are doing more and more research on digital moneys every day. Moreover, the number of people investing in Bitcoin is increasing and everyone asks financial consulting companies or banks about Cryptocurrency almost every day. It is clear that these digital currencies have some disadvantages. For example, altcoins can be seen as a bad alternative to traditional money in the context of criminal activities, because virtual currencies will make it easier to carry out criminal activities such as money laundering, drug trafficking, hacking and terrorism.
However, it is also clear that none of these activities are a widespread or comprehensive obstacle to the use of Bitcoin. There are other negative or unrelated negative aspects of using virtual money, such as speculation, risky investment, and the problem of unpredictability. It is clear that without the necessary legal regulation and central bank or government guarantee, users of BTC or any other Cryptocurrency bear all the risks.
Trump Impact on Bitcoin!
As a result, we can say that if cryptocurrency is going to take on the role of money one day in the future, it should also fulfil the functions of money. Although it has some of the functions of money, such as being a store of value, a unit of account, and a medium of exchange, it is clear that these new digital moneys have not yet been able to fulfil all of these functions properly.
Despite the great popularity and large number of investors of Bitcoin, the most well-known digital currency, it is a fact that it has not yet been accepted as a traditional monetary system all over the world. After considering all these facts, especially in the short term, it seems that this digital currency can be an investment tool for investors who like to take risks instead of taking on the role of traditional money.
At this point, as we enter 2025, Donald Trump’s victory in the US Presidential Election on November 5, 2024 was a tremendous development for Bitcoin. The value of 1 BTC, which was in the 60 thousand USD band before the election, reached the 90 thousand USD limit the day after the election. In this context, it is clear that the fact that two crypto-friendly billionaires, Trump and Elon Musk, will rule the United States for the next four years is considered positive for BTC in the future. (Not investment advice.)
