Cryptocurrencies regularly steal headlines for a variety of reasons. Sometimes, a new coin will burst onto the scene and increase in value hundreds of times. Other times, we’ll see fluctuations in the old mainstays; Ethereum, and Bitcoin. However, all of these tend to lose sight of a simpler question - can you actually use cryptocurrencies for anything other than market speculation?
In a previous article, we covered what cryptocurrencies are and how they work. At the end of that article, we say that they can be used as a more secure, private alternative to traditional forms of currency, but of course we all know that’s not normally why people care about this strange, esoteric bit of technology.
Instead, people use cryptocurrencies in basically the same way that they use stocks. Speculators try to guess which coins will increase the most over a given period of time, and then will buy as much of that coin as they can, before trying to sell it at the perfect time. This is possible because of a key feature of cryptocurrencies.
If you go to this website, and look at the price of Bitcoin over the last year, you’ll see a truly insane amount of variation. From November 1st 2020 to November 1, 2021, the price multiplied 5 times, crashed down to half of that, recovered at around a 50% increase from there for a few months, and then recently jumped up to another peak.
In comparison, to find the timeframe it takes to change the price of the Dollar five times over, we have to compare the value today to that in the 1970’s. Though inflation tends to be big news when it gets severe, the volatility we see in these cyprotcurrencies is not even remotely comparable.
This rapid, extreme change in price makes Bitcoin an attractive option for people trying to turn 1 dollar into 5, but trying to pay something with 5 dollars that might turn into 1 tomorrow is significantly less attractive.
While cryptocurrencies do have their benefits when it comes to security, they’re not a very good option to buy things with. A stable currency is a good currency, and trying to use something that might quintuple in value in a few weeks to buy anything mundane is far from ideal.
Until Bitcoin stabilities, you should use it only as a last resort, and you definitely shouldn’t keep significant amounts of spending money tied up in it.