Blockchain
A quick look at the evolution of money
From the interchange of goods for goods without proper evaluation, to commodity money, our understanding of money has evolved with time.
Money has come a long way. From the interchange of goods for goods without proper evaluation, to commodity money, our understanding of money has evolved with time.
Trade by barter began as the fundamental of currency exchange when people began to exchange their excesses for other necessities. The items that were traded were typically in their elemental form and catered to the basic necessities of the individuals involved in the trade. As such, there was no value assessment of the items exchanged. This posed a problem and subsequently led to the invention of commodity money.
Commodity Money
Certain items became more in demand than others. In time, they became a form of currency. This is what is described as commodity money. Some examples of commodity money used in many parts of Africa and in South America are salt, cloth, cattle, and cowries. However, commodity money soon grew impractical as a result of alteration in the economic value of these items. Humans soon evolved to using metal money.
Metal Money
Metal was originally used in its elemental form, but in time, they were first moulded into slabs and then, coins. They were also made into trinkets and accessories, which were also valuable. Metal also replaced stone and wood as the materials used for weapons and utensils.
As the use of metal began to evolve, weight measurement became the means of assessing its value. However, in order to make trading faster and more convenient, the value of the slab of metal was inscribed into them.
The coins that resemble what we have now were first introduced around the 7th century B.C. Over the centuries, metal money was made from different metal and metalloid materials. Some of the more prominent and most valuable ones include gold, silver, and bronze.
However, currency evolved to become more about the inscriptions of them than about the value of the metal itself, in order to regulate and control the circulation of money. Since the value of the metal became meaningless, humans realized we didn’t have to use metal at all.
Paper Money
The first banknotes were issued by the Bank of Brazil in 1810. The value of the note was written by hand just like we do with cheques. Soon, the technique was replicated in print across the world. Paper money has evolved in the quality and durability of the paper used over the years. Currently, both paper money and coins are the two most used forms of money.
Representative Money
Both paper and metal were used as representative money before we evolved our current system. Representative money, as briefly mentioned above, worked just like cheques. They were used as receipts for precious material. They were mostly made with inexpensive materials like paper or copper and represented a fixed value for precious metals, like gold or silver. They were issued by a bank or by the government and could be exchanged for goods or services.
Fiat Money
Money has taken several shapes over the centuries. However, monetary systems have also varied distinctively. There are three common types of monetary systems – commodity money, representative money, and fiat money. Currently, most of the world runs on a fiat monetary system. This system is regulated by congruent legislative laws. Fiat money uses similar material as representative money. But instead of storing gold or silver in the bank, fiat money represent value in themselves.
This method was developed when banks realised that many people were not coming back to collect their gold or silver deposits and instead, did most of their transactions with the representative receipts.
While fiat currency has no intrinsic value in itself, the value is in the scarcity of it, regulated by the Government.
The Advent of Digital Currency
The pattern of money evolution shows that currency evolves due to factors that reflect human need for convenience. When the invention of new material and better understanding of trade, currency has changed form over the years. Money was not just invented by a stroke of genius, it evolved from necessity, and the evolution of it shows us that humans will always find ways to merge currency with the realities of its socio-economic systems. We live in the digital age, and most of our basic necessities have been digitalised. So the question is, why not money?
This article is in partnership with Quidax. Quidax is a European based digital assets exchange with a focus on Africa. We provide a seamless platform for users to send, receive, buy and sell cryptocurrencies using their local currencies.
Blockchain
Tezos, the small digital coin that makes Bitcoin’s record look ordinary
Tezos, which was designed as a “self-amending cryptographic ledger” and uses the so-called verification model, has emerged a big fan of tokenized real-estate and security tokens.
Bitcoin has done better than most financial assets in 2020 and is on the path to becoming one of the best financial bets for the year. Its price recovered after plunging in March, amid the COVID-19 induced sell-offs. It has since gained about 30% so far.
However, one little known digital coin has almost doubled in price since the beginning of the year, and it still shows more upside in its present momentum.
Tezos, trading under a sticker XTZ, has gained about 91% since the start of 2020. Tezos was trading at $2.56 at the time of writing this report, with a market capitalization of almost $1.817 billion, according to data obtained from CoinMarketCap.
READ ALSO: Why Forex trading is becoming popular in Nigeria
At the start of 2020, Tezos was the 15th most valuable crypto asset by market value according to the data. It has since managed to climb into the top ten most valuable cryptocurrencies and could surge past its crypto rivals with its current momentum.
Tezos, which was designed as a “self-amending cryptographic ledger” and uses the so-called verification model, has emerged a big fan of tokenized real-estate and security tokens.
“Tezos seems to be one of the most popular platforms for new projects to build on at the moment,” said Mati Greenspan, the founder of market analysis firm Quantum Economics told Forbes in a recent interview
READ ALSO: Dangote, MTN, Industrial stocks lead bears to pull market’s indicators
“Several projects that I’m currently advising are using it. As well, the tokenomics are structured in a way that a lot of the incoming supply is diverted to staking and taken off the market,” said Mati Greenspan, the founder of market analysis firm Quantum Economics.
In addition, after Bitcoin’s recent halving has made it harder to mine Bitcoin, many have suggested that miners (people who produce Bitcoin after a difficult task is completed) might as well switch their computing strength to other cryptos —potentially giving Tezos a boost.
Blockchain
Bitcoin is giving better returns than the Nigerian stock market
Bitcoin has attracted hedge and quant traders who make money on short-term price swings.
With the COVID-19 pandemic still raging on and upsetting markets, Bitcoin has outperformed the Nigerian stock market and even most global equities; only performing worse than gold. Investors attribute Bitcoin’s performance to bets/bids that have been made to hedge against inflation.
In 2020, Bitcoin has only posted a loss of around 5%, compared to respective drops of 17.5% and 18% for the Nigerian and MSCI All-Country World Index. With a market capitalization of over $126 billion as at April 22, 2020, it is much bigger and more liquid than the Nigerian stock market (market capitalization less than $31 billion dollars —N11.793 trillion est. April 21, 2020).
Like stocks and other riskier assets, Bitcoin climbed up in the wake of massive stimulus packages launched by fiscal authorities and central banks around the world last month to ease the economic damage caused by the COVID-19 outbreak.
In addition, with a supply pegged at 21 million, its rarity gives it an intrinsic value and protects it from global central banks’ moves or policies that encourage inflation.
READ MORE: Bitcoin price under pressure, stays under $7000
However, in 2020, bitcoin performed poorly against popular safe havens like gold. Just last month alone, Bitcoin slumped more than 35%, showing that gold has proven far more resilient than Bitcoin
A pile of bitcoins
Bitcoin which is notorious for high price swings, has found its use as a means of digital payment and scared off institutional investors such as pension funds. It has however attracted hedge and quant traders, who make money on short-term price swings.
READ ALSO: Nigeria’s Inflation rate jumps to 12.26% in March as recession looms
As its volatility soared, major cryptocurrency exchanges saw huge movements in volume last month. Many speculators sold off the cryptocurrency (like other assets) to raise money.
“I’m long gold, I’m long bitcoin – we are seeing a monetization of debt like we have never seen in our lifetimes,” Novogratz said in a Monday interview with Bloomberg TV. “To me in the long run, that has to make hard assets look better.”
Blockchain
Bears extend reign to crypto market, drops by about 50%
Bitcoin made further drastic losses sinking below $6,000 for the first time since May 2019 due to a coronavirus scare.
Bitcoin once tagged as a ‘safe haven’ asset, has recently proved bookmakers wrong again. On March 12, Bitcoin made further drastic losses, sinking from $10,000 to below $6,000 for the first time since May 2019 due to coronavirus scare.
At its current price of $5,500 on Friday, 03.05 pm Nigerian time, bitcoin seemed attractive to buy. However, investors’ bias was broken with heightened uncertainty in the global economic outlook.
A pile of bitcoins
For these reasons, we can expect that the current bounce towards $6,000 might be a temporary relief on the way down.
However, the sudden drop comes after months of stable price growth, which saw Bitcoin rose from below $6,000 at the start of the year to above $10,000 by late February.
[READ MORE: Cryptocurrency: Discern investors’ goldmine)
Chief Executive Officer, BitMEX, an exchange registered in Seychelles, Arthur Hayes thinks that the likely bottom for Bitcoin lies at around $6,000. As the flagship token suffered from the spread of the coronavirus, altcoins took a more severe hit with heavy losses seen across the board.
The latest crash appears to dispel this narrative, as it coincided with the sharpest rise in coronavirus-related deaths since the outbreak began.
Bitcoin bearish party seems to be utterly unstoppable. The selling pressure has been unrelenting on Thursday and could last throughout the day’s trading sessions. Data by CoinMarketCap shows that the market cap lost over $17 billion from the $223 billion recorded on Wednesday to $335 billion at the time of writing.
The reported trading volume is, however, on the rise, from $136 billion to $144 billion in the same period. Intriguingly, Bitcoin dominance has increased from 64% to 65.6%, to show that altcoins led by Ethereum have taken a huge plunge.
[READ ALSO: French Government addresses the danger of Facebook’s Cryptocurrency)
On Twitter, CEO, Invest Diva, Kiana Danial, explained that the current development witnessed in the industry went contrary to the general belief of the market. According to him, the market is usually insulated from global threats like coronavirus.
He said, “What happened have left many disappointed, as the digital currency has not been acting as the ‘safe haven’ it promised to be”.
The dramatic loss in value mirrored the drop in stocks as well as crude oil, with the main markets reacting to further bad news about the coronavirus epidemic. In addition, global uncertainty suggests investors’ desire to close positions in risky assets such as cryptocurrency.
Denis Vinokourov, Head of Research for London-based digital asset firm, Bequant, stated on Forbes Magazine that the crypto market had declined “sharply” in the last 24 hours, with bitcoin falling more than 20% in an environment characterized with worries about coronavirus.
Another factor is the U.S. President Donald Trump’s latest travel restrictions and panic-driven selling witnessed in the market. He noted that the desire of investors to sell off their holdings triggered “a liquidity crunch as the cost of capital spiked up across crypto exchanges.”
In addition, President Trump, on March 11, banned travel for most of Europe to the United States and the equities markets reacted with further lows. These drastic measures might have resulted in steep losses that leave the traders in the cryptocurrencies markets clueless of what will happen next.
Bitcoin
READ MORE: Luno breaks barrier, allows Ethereum/Naira trading pair
Furthermore, from a short term view, the impact of the global economy is very indecisive but bitcoin is currently trading like a risk on the asset. Despite having a negative correlation earlier, the cryptocurrency market may continue to fall in tandem with the global equities market and other leading assets apart from Gold.
However, we still believe in the long term fundamentals of bitcoin as an asset. At the moment, not many large financial institutions are investing in bitcoin or crypto assets, However, when there is regulatory and settlement risk, this will change. Once that happens, bitcoin will be on a par or overtake gold as the safe-haven asset.
