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May 21, 2021

Calling It a Currency Doesn’t Make It So

By:Dylan Ratigan

Dylan’s Weekly Note:

A commonly accepted definition of currency is something (coin, treasury notes or bank notes) in circulation as a medium of exchange. Inherent in that definition is some semblance of stability. A shop owner is not going to accept as payment something that can increase or decrease in value 100% before you even walk out of their shop. For a currency to effectively function as such, there needs to be a certain level of reliability as a store of value. Crypto ain’t it.

Bitcoin, ethereum, polkadot, dogecoin, pick your poison. They’re all designed to facilitate transactions (except dogecoin, which is what happens when the class clown becomes valedictorian). They’re fast, efficient, free of traditional currency constraints such as central banks and less costly to use. If I leave my house, head to Thailand and forget to convert my US dollars to Taiwanese baht, I can still buy food off a street vendor with crypto. I don’t have to go to a currency exchange where I’ll pay some exchange rate. I just take out my phone, beam over some crypto and get my food. Sounds great! The problem is, when the food vendor can’t control their margins because the currency with which I just paid keeps changing in value. There’s no store of value that can be relied upon. There’s no stability. Ultimately, there’s no transactional value.

So let’s do this. Let’s stop calling them crypto “currencies”. Instead, let’s call them crypto “assets” or, if we want to  think of them as the end to hegemonic fiat currency, crypto “nytes” (see what I did there?). These aren’t currencies. I have actual bills to pay and I can’t call the bank holding my mortgage, tell them the crypto I sent for this month’s payment used to be worth $2000 and I’m sorry it’s now only worth $200. That’s not going to fly. Until I can rely on that $2000 valuation to still be worth $2000 next week, month or year, I can’t rely on it for traditional currency purposes. 

Currencies need to facilitate transactions. They need to be semi-stable. In theory, there should be some level of scarcity to them and in this sense, crypto actually does have an advantage to traditional fiat currencies. But that advantage is more akin to precious metals, like gold. The next time you go out for dinner, try paying with a brick of gold and then carving off a few more shavings for the tip. It’s just not convenient. And that’s the rub with crypto as well. 

Current crypto products may one day evolve into commonly accepted means of payment. They may become as ubiquitous as paper currency. That could be a very good thing. It could make buying goods from remote regions of the world that lack safe and secure banking easier. It could cut down on counterfeiting. Money stolen as part of a scam could be tracked down and returned to the rightful owners. There are infinite possibilities for crypto currencies, but we’re not quite there yet, folks. 

Be sure to catch Dylan Ratigan & Tom Sosnoff every Wednesday at 1pm CT for a new episode of Truth or Skepticism live on

Listen to previous episodes on Spotify, Apple Podcasts or on

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