Byline: Hannah Parker
Due to technology and various innovations launched daily, the world is constantly evolving along with different industries, causing people and daily life to adjust and adapt to the changes. Regarding economic issues, the global finance industry has been led according to traditional systems, regulated by central authorities in the form of governments, banks, and other intermediaries. Over the years, especially the last three years since the Covid pandemic began, global economies have suffered violent instability, causing the poor to become even poorer. Unemployment rates are at their peak, especially in developing countries; many are scrambling to make means with the little bit that they have. Even for those who are somewhat financially secure, the ever-inclining global inflation rates leave many with little to nothing left but to provide for their basic and essential needs.
There are : demand-pull and cost-push. Both are responsible for a general rise in prices in an economy, but each works differently to put pressure on prices. Demand-pull conditions occur when consumer demand pulls prices up, while cost-push occurs when supply costs force prices higher. According to research statistics, in 2021, Burundi reported the lowest per-capita GDP ever, closely followed by South Sudan and Somalia. All three countries struggle economically because of poorly developed infrastructure and a low standard of living. Central African Republic, the Democratic Republic of Congo, South Sudan, and Somalia are the world’s poorest countries. How and why is this significant? Well, a country’s GDP is a barometer that reflects whether a country’s economy is stable or unstable. It is also significant for businesses and investors because when GDP growth is strong, companies hire more workers and can afford to pay higher salaries and wages, which leads to more consumer spending on goods and services. Companies would also have the confidence to invest more when economic growth is strong, and investment lays the foundation for economic growth in the future.
Let’s take the stock exchange as another example. Traditional finance systems and central authorities lead and regulate the stock market. For instance, with traditional banking, banks tend to have many loopholes that lead their customers to incur more fees they aren’t often aware of. Moreover, stocks are traded according to regular banking hours. Most importantly, the traditional stock market is majorly influenced by factors such as “the announcement effect,” which refers to the impact that any type of news or public announcement—especially when issued by a government or monetary authorities—has on financial markets or investor behavior. Through the announcement effect, stock prices can quickly move up or down based on the release of positive or negative news, presenting investors with headline risk and providing day traders opportunities to make short-term profits. In addition to this, government-issued announcements, economic data releases, or guidance from the Fed can also move broader markets and investor sentiment.
We cannot just depend on traditional means and systems to stabilize global economies and for people to earn an income. This is supported by , a reputable platform that mentions the top reasons one should invest in digital assets. As a people, we need to adjust and apply the innovations that have come into being, creating new norms. This includes the concept of digital currencies, assets, and investments. Cryptocurrency as an industry is majorly changing the trajectory of global economies, peoples’ lives, and daily life. Crypto investments are decentralized, meaning they function outside the influence of a central authority such as a bank or government. In contrast with traditional banking systems, decentralized investments and finance introduce a fairer and more transparent financial system. Crypto markets are always open, meaning trades happen around the clock. Compared to traditional financial systems and markets, one does not have to wait for the NYSE, NASDAQ, or any other exchange to start trading for the day if one wants to buy, sell, or trade their stocks. Most importantly, there is no inflation with cryptocurrency. This is because cryptos are not carried by one currency or dependent on one economy. Many cryptos function globally, as the market is not tied to a specific nation.
The bridging of crypto and traditional finance systems
Currently, traditional institutions, along with various other industries, are making means to integrate crypto technology, specifically blockchain technology. For instance, the world’s largest bank, JP Morgan, formed Onyx, the world’s first bank-led blockchain platform to exchange value, information, and digital assets. Using the blockchain division for wholesale payments, the blockchain was also developed for foreign exchange tokenized cash deposits. The institution joined ventures with other financial institutions, including Singapore’s DBS Bank, Japan’s SBI digital bank, Marketnod (a digital asset exchange platform in Singapore), and Temasek (Singapore’s state investor) to test the DeFi system and was facilitated by the Monetary Authority of Singapore.
Innovations and technologies brought by the crypto industry are steadily being integrated and adopted by various industries and institutions. Most importantly, blockchain technology is also used daily to solve real-world issues. Evidently, it is important to explore outside of traditional systems and to dabble in the innovations coming about to create new norms and more opportunities to benefit nations, economies, and people.