Traditional Finance and Its Effects on Bitcoin and Blockchain

• Traditional finance impacts the crypto world.
• Macroeconomic events demote decentralization.
• We are still dependent on the fiat currency.

Bitcoin is one of the most important cryptocurrencies in the world as it sets what the crypto market is today. It has been impacting actively in the financial markets since its launch, and vice versa is also true. Financial markets also greatly affect the core trading and functionality of Bitcoins.

 

Macroeconomic events hugely impact the trades of Bitcoin; while Bitcoin is a major cryptocurrency, it is still brought in fiat currencies. We have yet to transition from traditional to decentralized finance fully; we are still dependent on the fiat economies worldwide.

Macroeconomic Events Affecting Bitcoin

Events that occur worldwide in different economies directly impact crypto markets. Macroeconomic factors of traditional finance still influence the crypto world directly. The factors by which they are affected gravely are:-

• Strength of Fiat currencies

In every country, its worth is measured by the number of goods and products it can provide to its consumers outside its homeland. The strength of its fiat currency can be measured in terms of its reserve and cash flow within the country.  

The more trade, the better the country and the stronger its fiat, which in turn means that there is a possibility of more affording and trading in crypto, which would also mean there will be a boost in the crypto market.     

• Government rules & regulations

This is a significant factor in the rotation of crypto into the mainstream; if the government is not supportive of cryptocurrency and blockchain, it would be impossible for the crypto market to grow and flourish.

The European Union(EU) recently introduced regulations for the acceptance of crypto in the mainstream. However, the EU is very particular about crypto and has allowed only a few cryptocurrencies to be used in the country. But it’s a start for the better, and this macroeconomic factor will affect and prove the importance of it in the long run.  

• Resources for Bitcoin mining

Resources are important for the macroeconomic growth of any country; they play a key role in building the foundation for exponential growth for a nation. If there are no resources for mining Bitcoin, there will be no point in cryptocurrencies. It would directly impact the stature of cryptos. In Bitcoin mining, many resources are required, like computers and electricity. These are resources that are coherently linked with multiple resources, and providing them is a country’s responsibility.

• Recession and Expansion

The inflation in the economy directly impacts the monetary standards in multiple ways, which means that crypto is still affected. Recession was the birth of cryptocurrency, and it was moved forward in the coming years after. 

Conclusion 

It would mean better opportunities for crypto or bitcoin to thrive. Ultimately it will be affected by recession till traditional finance exists if there are no basic means for finance to live. Once we have fully adopted decentralization, we won’t be free from the macroeconomic factors of traditional finance.   

 

Disclaimer

The views and opinions stated by the author, or any people named in this article, are for informational purposes only and do not establish financial, investment, or other advice. Investing in cryptocurrencies and NFTs comes with a risk of financial loss.