Federico Sellitti @federicosellitti: "Yesterday there was an interesting..."

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Yesterday there was an interesting debate here on eToro about cryptocurrencies. One person was clearly against them, while the other is definitely in favor, posting almost every day about crypto. I want to give you my unbiased view. Unbiased as in: I don’t like cryptocurrencies, and I like even less most of the people in the crypto space. But I still invest ("speculate" maybe is a better term) in cryptos. Bitcoin is often presented like this: in the future we won’t have US dollars, euros, or Japanese yen. We will all use Bitcoin (or some altcoins). Banks will disappear, they won’t “steal” anymore our money with fees, and we’ll be free to use Bitcoin anywhere in the world. That’s how Bitcoin started. That’s what many supporters still believe. Unfortunately, if you ask me, as a student and passionate of economics, this is an impossible scenario. I could talk about volatility (which is great for trading, but terrible for a currency), inflation vs deflation, the limits of a fixed money supply to monetary policy, scalability (Bitcoin can handle around 7 transactions per seconds, $V (Visa) 50,000), and more. But since space here on eToro is limited, I want to focus on what I think is the most overlooked problem, usually dismissed with phrases like “banks steal our money”, as if banks didn’t serve any function in society. 💲 Lender of Last Resort 💲 This is a fundamental concept of the financial system. Banks work by borrowing short-term and lending long-term. For example: You deposit $1,000 in a bank and you can withdraw it at any moment. This is short-term funding. The bank lends that same money as a 20-year mortgage. This is long-term lending. Now imagine too many people ask for their money at the same time, while mortgages are still outstanding. The bank can fail even if it is fundamentally healthy, simply because it cannot instantly get that cash back. In situations like this, the lender of last resort (the central bank) steps in to stop the panic. The central bank essentially says: “I’ll give you the liquidity you need right now. Pay me back later.” This calms the public, prevents bank runs, and keeps the financial system functioning. They are not giving away free money. They are preventing the economy from freezing. With Bitcoin, this cannot happen. There is no central authority, no mechanism to provide emergency liquidity, and no way to stabilize the system in a crisis. Translated into ordinary daily lives: people could not buy homes, companies could not invest, governments could not fund public services. Bitcoin does not cause the crisis. It simply cannot support the solution, unlike the current financial system. “So Bitcoin and cryptocurrencies are bad and I shouldn’t invest in them?” That’s not my point. My point is that, despite some cryptos introducing solutions that Bitcoin does not have, cryptocurrencies are still very far from offering a sensible improvement to the financial system. At the moment, from a macroeconomic perspective, they are closer to a downgrade than an upgrade. That said, this does not mean they are a bad investment. I personally have almost 5% of my portfolio in $BTC , and I plan to increase my allocation if the price goes below $82K. An asset that trades 24/7, has proven demand, attracts institutional money and has almost cult-like conviction behind it, must be taken seriously as an investment. Because Wall Street doesn’t care whether Bitcoin cures cancer or is useless digital junk. If it makes money, it’s useful. If it doesn’t, it’s useless. And Bitcoin has clearly shown it can make a lot of money, for those who know how to use it. $ETH $SOL $BNB

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