Is Cryptocurrency the Only Hope for the US Economy After the BRICS Summit?

Cryptocurrency has been a hot topic in the world of finance and economics, and many people are wondering if it could be the only hope for the US economy after the BRICS Summit. Here are some key points to consider:

The Economic Impact of Cryptocurrency:

Cryptocurrency has been both overt and subtle in its economic impact since the inception of Bitcoin in 2009. As of January 2020, more than 2,000 cryptocurrencies existed and nearly 36.5 million people living in the US own some form of cryptocurrency. Although cryptocurrency as a whole hasn't impacted larger sections of the economy like the stock market, 2017 saw hundreds of billions of dollars flow into cryptocurrency, further establishing it as a viable investment vehicle.

What Will Happen to Cryptocurrencies if the US Economy Crumbles?

The demand for all asset classes, including cryptocurrencies, is impacted by the intricate interplay of economic data. During difficult economic times, investors frequently rebalance their portfolios to less risky assets by looking to safe havens like gold. Cryptocurrencies have recently tried to strengthen their position against gold in order to act as a hedge against inflation and provide returns when conventional markets are unable to do so.

The US cryptocurrency market was valued at $1.19 billion in 2022, accounting for one-fourth of the total crypto market cap last year. Considering that a large proportion of crypto investors come from the US, a possible recession could force investors to hunt for assets like gold and crypto to support their portfolios.

The Treasury Department's Warning

The Treasury Department's Financial Stability Oversight Council released a report on digital assets in 2022, outlining several recommendations to keep cryptocurrency and digital assets trading from destabilizing US financial security. The report concludes that crypto-asset activities could pose risks to the stability of the US financial system and emphasizes the importance of appropriate regulation, including enforcement of existing laws.

The Future of Cryptocurrency

Cryptocurrencies have grown from digital novelties to trillion-dollar technologies with the potential to disrupt the global financial system. To their proponents, cryptocurrencies are a democratizing force, wresting the power of money creation and control from central banks and Wall Street. Critics, however, say that a lack of regulation for cryptocurrencies empowers criminal groups, terrorist organizations, and rogue states, while the assets themselves stoke inequality, suffer from drastic market volatility, and consume vast amounts of electricity. 

In time, policymakers will face a Solomonic choice: either protect Americans from inflation, or protect the government's ability to engage in deficit spending. It will become impossible to do both. Over time, this compounding problem will escalate the importance of Bitcoin. The United States must maintain technological leadership in this rapidly growing space, supporting innovation while mitigating the risks for consumers, businesses, the broader financial system, and the climate. 

In conclusion, while cryptocurrency has the potential to be a viable investment vehicle and a hedge against inflation, it is not a panacea for the US economy. It is important to consider the potential risks and benefits of cryptocurrency and to regulate it appropriately to ensure financial stability.