According to an economist at UBS Global Wealth Management said that digital currencies/ cryptocurrencies can never be able to work as real currencies.
The main reason for this statement is the inability to alter the production rate of cryptocurrencies. The chief economist at UBS Global Wealth Management, Paul Donovan said, that “the fundamental flaw” integrated into cryptocurrencies is that their supply cannot be reduced according to the demand especially when it is slumping. Donovan said in a video this week and drew the conclusion that they cannot be considered as currencies.
Paul termed what he called a “proper currency,” as something that can be a stable repository of value and something that will provide assurance that it can be used to “buy the same basket of goods tomorrow as it buys today”. That confidence in embedding such a value to money comes from the ability of central banks to decrease supply when demand is declining. Such a mechanism for switching off supply is not available in most cryptocurrencies. Hence the value of cryptos can “slide leading to a collapse in spending power”, said Donovan.
In the video, Donovan also said that “People are unlikely to want to use something as a currency if they’ve got absolutely no certainty about what they can buy with that tomorrow.” Bitcoin could be directing below 50-Direct Market Access. In the Chicago Mercantile Exchange, bitcoin futures are placed parallel to the contracts for the world’s major currencies, but the contrast in daily trading measures says that some investors have not welcomed the cryptocurrency as a fully-fledged currency yet. On Thursday, (January 21) with 11% price jump for Bitcoin, transactions for the month of January futures were immediately above 13,000, meanwhile, there were approximately six times as many for Japanese yen futures.
