How War And Geopolitics Have Been Impacting The Cryptocurrency Market In 2022

Geopolitics on crypto

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The entire world was astonished when Russian soldiers invaded Ukraine last month, and the markets were anticipated to crumble, but the war’s impact on the crypto market didn’t remain stronger than ever. Cryptocurrencies have become a beacon of light, pointing us towards an alternative financial system. The rising function of crypto assets has thus been clearer than ever before and on a much larger scale in the middle of all the confusion and uncertainty.

Ukraine has indeed regulated its crypto industry, enabling exchangers to operate with impunity and requiring financial institutions to make payments for crypto enterprises after receiving over $63 million in virtual currency contributions. Such a move justifies the emergence of online or virtual money while also raising significant questions about their function in geopolitics.

Some IT businesses now have the strength, resources, and impact to compete with individual nations, and if cryptocurrencies get more prevalent, they may push to the limit of the resolution of a global order founded on geography. Therefore, before we can examine geopolitics impact on crypto, we must first grasp what cryptocurrency is, what a tomorrow ruled by them would look like, and cryptocurrency’s impact on global society.

What Exactly Is A Cryptocurrency?

A cryptocurrency, as per Tim Massad, previous chairman of the US Commodity Futures Trading Commission, is characterized by three important components. Firstly, it is a virtual representation of value; secondly, it may be exchanged digitally; and three, it is stored in a globally available public blockchain. There have been two sorts of digital currency: those issued by the government and those owned by private entities.

Sovereign cryptocurrencies, such as China’s Digital Yuan, are mandated by law. These are also referred to as Central Bank Digital Currencies (CBDCs), and, like fiat money, are verified by the producing country’s central bank.

To reconcile balances between consumers, private-sector digital currencies primarily rely on distributed blockchain technology. These exchange rates include Bitcoin and Ether, which vary in relative worth to the US dollar, as well as stablecoins, such as Facebook’s Diem, that are tethered to fiat money and meant to remain reasonably stable.

So, What Are The Benefits Of Using Cryptocurrencies?

Transferring money has become much simpler and, in some cases, secure for customers. Cryptocurrency transaction fees are substantially cheaper than those charged by most institutions. CBDCs may be advantageous to governments whether they can enjoy the benefits of the first-mover disadvantage. China, for instance, is far more advanced than its peers in terms of developing a sovereign digital currency which is its approach to establishing trades with other nations. Likewise, nations can benefit from cryptocurrencies by enacting favorable policies (like Portugal has done) that encourage capital inflow.

Cryptocurrencies can completely change the financial sector. The market discovery process makes it hard to derive information about the health of private organizations or the overall economy itself from asset values. In practice, if everybody used electronic money, we’d have a networked finance matrix in which every property competed with every other commodity.

American Financial Power Must Be Challenged

The US Dollar is the major stable currency and serves as the standard for worldwide trade. As a consequence of this supremacy, the US may control its economy at will, frequently with global ramifications. If somehow the dollar is supplanted by digital currencies, Washington will lose its clout over businesses and states.

Many people support such a severe change. Even Elon Musk and Mark Zuckerberg have claimed that virtual currencies are ideally equipped for a more multipolarity since they are not controlled by any single nation. Yet, the two major contending countries, America and China, are still not currently attempting to democratise the currency system, but rather to consolidate their dominance over it.

The Last Words

China, for its side, stands to profit from the Dollar’s collapse but is betting that the Dollar will be supplanted by the Yuan or Online Yuan. China’s push for cyber supremacy is consistent with President Xi Jinping’s aspirational foreign policy. Its Digital Yuan is now used by nearly 220 million people in China, as well as the Chinese Central Bank has previously investigated a digital currency inter-transaction initiative with Thailand, the United Arab Emirates, and Hong Kong.

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