The cryptocurrency market is booming.
It’s becoming more and more clear that cryptocurrency will become the future of currency, while banks are still stuck in the past.
However, a large number of people still prefer to use their bank account over cryptocurrency for a variety of reasons – primarily because they don’t know how it works or they’re just too afraid to try something new.
In this post, we’ll compare cryptocurrency vs banks so you can decide which is better for you!
Before we dive in lets take a look at…
What is Cryptocurrency?
A cryptocurrency is a form of digital currency that can be used to make purchases, transfer money and pay for goods and services
It is a type of digital currency which uses cryptography to secure transactions and validate new blocks.
Bitcoin was the first cryptocurrency ever created in 2009 by an unknown person or group using the alias Satoshi Nakamoto.
Cryptocurrencies are not backed up by a government so their worth is determined by supply and demand.
There are more than 4,000 cryptocurrencies in existence as of January 2021 and the number keeps increasing as more Crypto coins and tokens are being created.
The popular ones include:
- Bitcoin (BTC)
- Ethereum (ETH)
- Cardano (ADA)
- Ripple (XRP)
- Tether (USDT)
- Polkadot (DOT)
- Stellar (XLM)
- Bitcoin Cash (BCH)
- Binance Coin (BNB)
- Uniswap (UNI)
The process of buying cryptocurrency involves exchanging one type of fiat currency for another which has been converted into cryptocurrency.
You can buy and trade cryptos on platforms like Coinbase.
What are Banks?
On the other end, Banks are institutions that hold people’s money and act as intermediaries between their customers and other financial organizations.
They make money by charging service fees (aka transactional costs) on top of the interest rate they offer for loans or savings investments.
Banks also make a lot of profit off transaction fees when you use your card to purchase things with credit, which is why it’s best to avoid borrowing from them if possible.
As an institution governed under federal law and backed up by FDIC insurance, banks have historically been more trustworthy than cryptocurrency because they’re insured against losses due to fraud or bankruptcy – something cryptocurrency exchanges can’t do (yet) since most don’t qualify for federally-backed deposit insurance as banks do.
You landing on this comparison post of Crypto vs Banks already tells you already know a lot of (or few) things about banks.
That’s more reason why I will make this post more about Cryptocurrency, its benefits, and how it compares to saving your money in banks.
What are The Benefits of Cryptocurrency?
#1. No hefty fees
One of the major benefits is that you don’t have to pay hefty fees when transferring money overseas.
Cryptocurrency only needs a small fee, which makes it competitively cheaper than banks and other financial institutions.
#2. Lesser worries on exchange rates
You can keep your funds in Bitcoin for an extended period without any risk or worries about exchange rates as well.
#3. No delays
Decentralized exchanges help avoid transaction delays due to bank holidays like those observed when transferring funds internationally with SWIFT wire transfers (which take up to five business days).
Cryptocurrency trading and transactions happen 24/7/365.
#4. No interference
No third-party interference: unlike banks and other financial institutions that may charge high fees or refuse to process transactions, cryptocurrencies are not controlled by any government or institution.
It also can’t be seized from you because it doesn’t have an owner-only you control the private keys for accessing and using your coins.
This makes cryptocurrencies better than most fiat currencies out there today.
The price of cryptocurrency is much more stable, which means your money won’t become worthless in a day if the market crashes.
The stability in Cryptocurrencies makes it a better platform to save money.
The price of Bitcoin has been steadily growing since its inception, but it will never get too high where you have a million dollars in your account, and the next minute it’s gone.
While cryptocurrencies are very volatile compared to other assets like gold or stocks, they’re much more stable than most fiat currencies.
#6. They keep going up in value
You see, as the popularity of cryptocurrency continues to rise, more people invest in it.
That means that the value of cryptocurrencies is likely only going up. It’s not unheard of for an individual coin to increase by as much as 300% in a single month.
Crazy isn’t it?
Cryptocurrency vs Banks: Core Differences?
You might be wondering a lot of things about holding your net worth in banks vs holding them in crypto.
Well, As someone who’s highly invested in Crypto and have his over 20% of his net worth in Crypto – here are differences between saving in banks vs Crypto:
#1. Unlimited printing
Banks have the ability to print more (and unlimited) money – they can simply create new cash out of thin air, while cryptocurrencies cannot.
Cryptocurrencies are decentralized and run by people all over the world, which protects against inflation that may be caused by a small group controlling a central bank.
Cryptocurrency wallets do not require any minimum balance or monthly fees for use (though there may be transaction or gas fees) – Banks often charge these types of charges in order to maintain their business.
Banks are more regulated. If you lose your money in a bank, it is insured by the government and they will return what was lost to you.
Cryptocurrency wallets and exchanges do not have this protection.
You would be out of luck with any losses related to that wallet if something happened due to hacking or theft.
#5. Requirements for operation
Banks require more of personal information than cryptocurrencies do which raises security risks for banks – not cryptocurrency wallets.
It’s pretty easy to create a new email address that won’t give up any sensitive information but still allows access from anywhere in the world.
However, most Crypto exchangers like Binance requires some level of verification to be able to fully trade and buy coins from the platforms.
#6. Interest rates
From my experience saving my money in Cryptocurrency has given me more returns than saving in banks.
I’m talking about 5000% in as little as few months.
Typically, savings account interest rates is between 0.06% -0.55%.
Cryptocurrencies on the other hand offers at least 12% in interest. And the more you hold for the longer time the higher the return.
This means that for every $100,000 you save in banks will give you around $1200 a year in return and Cryptocurrency wallets can yield more than triple that amount which would be around $3600 per annum on the lower side.
Banks also have FDIC insurance which protects deposits made at banks should there ever be insolvency on behalf of the institution.
However, not all cryptocurrency exchanges offer similar guarantees meaning users must trust their exchange for 100% safety.
FAQs on Crypto vs Banks
Is Cryptocurrency a Threat to Banks?
In some way yes.
With rate at which things are going – Cryptocurrency poses as serious threat to banks.
This is because BItcoin and Crypto users can now process as many payments as possible anytime of the day and week without the need with for interaction with banks, and avoid bank fees.
Are Banks Afraid of Cryptocurrency?
Well, in a way, they are.
Banks generally don’t like the idea of Bitcoin or any other form of currency that isn’t theirs and doesn’t require them to take the risk for you if your funds go missing.
That’s one reason why people sometimes refer to banks as “fearful” of Cryptocurrency – because it means less power and control over their customers’ money.
Will Cryptocurrency Kill Banks?
If you ask me, I’d say – I don’t think so.
Banks have existed for hundreds of years, and I don’t see any reason why they can’t continue to exist alongside cryptocurrency.
Cryptocurrency is a digital currency that functions without the need for banks.
It’s decentralised – meaning there are no intermediaries or third parties involved in transactions between two people or organizations other than a public blockchain network such as Bitcoin – best example being how you’ll never have someone from your bank asking where you spend your money when using bitcoin.
Because it all takes place on an open ledger with complete visibility into transactions and balances.
To put things simply: if everyone starts using bitcoins then eventually the power will shift away from central authority/banks towards those who control cryptocurrencies.
And well, the good news? Nobody actually controls the Crypto market.
Why do Banks Hate Crypto?
Crypto has the potential to replace banks as a financial institution which is why they don’t like crypto. They are hesitant to embrace cryptocurrency because it’s new, volatile and different.
Cryptocurrency also posses as a threat to banks due the fact that it has the potential to remove intermediaries such as banks.
Cryptocurrency offers a cheaper way of sending money world-wide that doesn’t involve any intermediary like banks and encourages people to use less cash, creating an environment in which payments are more traceable.
Bitcoin is not anonymous but it does offer some degree of anonymity because it’s possible for transactions on Bitcoin’s blockchain to be completely unlinked or conceivably linked only by artificial intelligence with a great deal data crunching capability due its high level of complexity.
What is the Disadvantage of Cryptocurrency?
One of the main disadvantage of using Cryptocurrencies is that they are not backed by any central bank or assets.
This means that Cryptocurrency is susceptible to significant fluctuations in value, and there is no way of predicting the future price-point for a particular type of cryptocurrency; it could go up, down, or stay still – with no certainty involved.
Another disadvantage of using cryptocurrencies as your primary form of saving money is that they are highly volatile: one minute you might be making profit on an investment balance which has appreciated significantly.
While at another point you may have lost out all invested amounts due to market crashes and dips.
This volatility makes planning difficult when relying solely on digital currency.
What Cryptocurrency Will banks use?
As at when writing this post, banks are not using any cryptocurrency.
On the other hand, there is a company called Coinsbank that provides crypto-friendly banking solutions including Visa/Mastercard debit cards and payment processing tools designed specifically for businesses in this domain.
They have announced plans of launching their own digital currency exchange as well; so they will be providing both sides of the coin when it comes to exchanging your money from or into cryptocurrencies.
Is Cryptocurrency the Future?
If Cryptocurrency is the future or not is a difficult question to answer.
It is possible that Cryptocurrency will eventually replace fiat currency, but it may take years before this happens and even then there are no guarantees.
Fiat currencies have been around for centuries and have endured many changes in the world economy which has led them to be one of the most popular forms of money with more than $20 trillion dollars being circulated across the globe today.
The prospect of giving up paper bills or coins is not appealing enough for people yet since they can still use their smartphones as payment methods instead when necessary, so we cannot say definitively whether cryptocurrency will become our new form of currency within five years or 50 years from now .
In general however, cryptocurrencies do provide an alternative way for countries experiencing economic growth.
Do banks support Bitcoin?
For now, banks do not support Bitcoin or any other Cryptocurrency.
This means that if you want to save in a bank, your money will be converted into government-backed fiat currency before being deposited into the account.
Banks also have strict limits on how much can be withdrawn and transferred at one time with certain limitations for using ATMs which is something cryptocurrency does not have.
Crypto eliminates this crazy limitation we experience in the banking sector.
Can Bitcoin crash?
Yes, it is possible that Bitcoin can crash.
This was the case in 2011 and 2013 when prices fell by more than 50%.
The price of a bitcoin also dropped significantly on July 11th 2017 after Ethereum had its own fork which split into two separate currencies: Ethereum (ETH) and Ethereum Classic (ETC).
However, it’s important to note that cryptocurrencies are not as susceptible to crashes because they’re decentralized systems with no central authority.
In other words, there’s no single entity holding all the power like we see in traditional banks or governments.
Can I buy Bitcoin with my bank account?
Definitely you can buy Bitcoin or any other Cryptocurrency with your bank account.
But, you need to open an account with a Cryptocurrency exchange or brokerage in order to be able to purchase Bitcoin from your bank account.
It is not very complicated and can take as little as 15 minutes of time for the process.
Once done, you will have access to buy any other cryptocurrencies supported by that specific company outlet such as Bitcoin (BTC), Cardano (ADA), Ethereum (ETH), Litecoin (LTC) etc.
Below are the popular Crypto exchanages from which you can buy from with your bank account or card:
Final Thoughts on Cryptocurrency vs Banks
Cryptocurrency is the buzzword of the year, and for good reason. It’s getting more popular every day.
And while it might be a great way to invest your money in the future, or even make some quick cash on the side, you should also have an understanding of how cryptocurrency works.
Before you ever think of diversifying and moving some of your cash from bank to a crypto wallet.
Yes, we can agree that banks and the government are becoming manipulative, less and less reliable, but they still have an inch of ground on cryptocurrencies.
The banks are insured so all deposits made should there ever be insolvency on behalf of the institution.
However, not all cryptocurrency exchanges offer similar guarantees meaning users must trust their exchange for 100% safety.
In conclusion: I think that while many people are looking to invest in Bitcoin, Ethereum etc because it’s seen as a good way to save make money with little work involved at this point in time, you really need to do your research first before investing more than what you’re willing to lose if things go wrong (i.e., buy bitcoin from Coinbase).
The idea behind crypto is amazing and might just change our economy one day, but we can’t be too sure yet.
Two of the most trusted place I (and millions of people) buy our Bitcoins or any other crypto is Coinbase (get free $10) and Binance exchange.