This CNBC article from a few days ago discusses the decline in the price of cryptocurrencies: 80% below the peak at the beginning of the year. It also mentions the issue with a cryptocurrency called tether. The promise of tether is that the issues hold equal amount of US dollars as backing so that one tether is worth one US dollar. The problem is that there has been no independent audit of the company and it is not clear they indeed hold the amount in US dollars they claim. Furthermore, it seems that large quantities of tether were exchanged at various time for bitcoin and there is suspission that this involved price manipulation.
The article summarizes two problems with cryptocurrencies: a) their value is unstable, b) and their setup is opaque.
ad a) the value of crytocurrencies is very unstable, and so it is not useful to buy goods and services. For example, an item that cost 1 bitcoin in January costs now 5 bitcoins. That is the rate of currency depreciation faster than any this year.
ad b) there is a lot of fraud, or suspected fraud in the cryptocurrency markets. In contrast, there is no fraud with regular currencies. Furthermore, their value is quite stable: as we have seen, over 100 years on the average the Canadian dollar lost 3% per year; in the last 20 years the loss was between 1% and 3% per year, and close to 2% per year.
Unless these, and other problems, are resolved, cryptocurrencies are not going to replace actual currencies.
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