Battle Between Banking and Bitcoin, Low ROI in Banks may Lead to their Downfall
Cryptocurrency enthusiasts are engaged in fervent discussions, prophesying the imminent demise of traditional banking systems. Dubbing conventional currencies as “fiat currencies,” proponents of Bitcoin and other cryptocurrencies vehemently oppose their dominance.
These discussions reflect a growing sentiment within the crypto community that their decentralized monetary systems will revolutionize the financial landscape, challenging the long-established hegemony of traditional banks.
Case in point, in Malaysia, those who are Bumiputera received a return percentage of 4.25 sen and a 1.00 sen bonus. A 5% return may seem generous, but with the major rise in OPR rates and loan payments from the previous years may make investments like these less profitable.
Back in the 1990s, the return rates for ASB was around 10%+ (after combining the base rates and bonus rates). For many, they were content with this level of returns in those days. It may even deter investors from investing in Bitcoin as cryptocurrencies are still regarded as having an unstable price range. Currently, we are seeing the price of a Bitcoin skyrocket to RM347,000 per coin and now it’s down to RM315,000 (the prices are retrieved from Luno).
Bitcoin vs the traditional fiat system
Crypto supporters state that the current “fiat” system we have has a major flaw which is called monetary debasement. It is historically associated with the erosion of currency value, and continues to evolve, impacting economies worldwide. Traditionally, debasement entailed reducing the precious metal content in coins while maintaining their face value.
According to Zero Hedge, in today’s world, monetary debasement extends to modern practices like increasing the money supply, often to fund governmental expenditures. Governments justify such actions as necessary for economic stimulation, yet they risk triggering inflation and economic instability.
With historical parallels from the Roman Empire to modern-day examples like Weimar Germany, the perils of unchecked monetary expansion remain a cautionary tale for contemporary financial systems.
However, with that said, investopedia listed the several limitations for Bitcoin to ever replace central banks as governments would need to declare that it’s their official currency for starters. Furthermore, there is a limited amount of the cryptocurrency available, and it will one day deplete completely, which could cause major problems if it is the sole currency used.
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