On the morning of December 17th, Will Ashworth thought of one of the most popular articles on InvestorPlace SoFi technologies (NASDAQ:SOFI). In short, he likes the discount SOFI stock offers due to the underlying social change; especially growing dissatisfaction with big banks. Ashworth brought up cryptocurrencies and my mind turned to decentralized money transfer services like Stellar (CCC:XLM-USD).
I suppose Ashworth’s post is a bit cumbersome for me because he used my view of the fintech company as a counterweight in a broad discussion about SOFI’s bullish narrative. Among my arguments, I mentioned the Federal Reserve Bank of St. Louis, which stated that the impact of rising interest rates on bank profits is ambiguous.
Anyway, Ashworth then stated that SoFi could meet the challenges of an uncertain year 2022 (and beyond). “Last but not least, cryptocurrencies illustrate the level of dissatisfaction among younger Americans with traditional banks such as JPMorgan (NYSE:JPM) and Bank of America (NYSE:BAC) “, Wrote my colleague.
And you know what? That argument is spot on. Indeed, young people are dissatisfied with the traditional financial system. So it’s no wonder that cryptos like Stellar rose to the moon.
Besides, it’s not just about dissatisfaction. Cryptos are inherently more convenient than traditional investments. I’ve mentioned for a long time that one of the advantages of Stellar and its ilk is the ability to trade 24/7. Well, to those of you who live on the east coast, that may not sound like that important because the market aligns with the working day.
And with the new normal, you have hours to complete your trades.
But it’s a challenge for people on the west coast. That remains the case despite home office initiatives, as the market closes for us at 1 p.m.
Dissatisfaction and convenience aren’t the only drivers behind Stellar
Russia is perhaps the biggest dissatisfied party of all today. The Washington Post recently reported that Moscow is demanding that the US and NATO stay out of its sphere of influence. From what I hear, Russian President Vladimir Putin is only building troops as a power game. Apparently the Russians have no intention of starting a heated conflict.
That may be true, but it is difficult to take those of our opposing nations at their word. I note that global opinion about China is falling considerably – not entirely for unjustified reasons – some circles are warming to Russia under the thesis that the enemy of my enemy is my friend.
I believe that in time the US will discover that the enemy of my enemy is still my enemy.
However, should Russia decide to escalate tensions in Eastern Europe, the US would theoretically have control over removing Russia from the SWIFT electronic payment system. Aside from responding to such a possible move, it creates some intrigue for cryptos like Stellar.
One of the early use cases of cryptos was to provide a faster alternative to the wire transfer mechanism. As anyone who has used the traditional method of sending money knows, it is cumbersome, inconvenient, and expensive. With Stellar, you could send XLM coins over a decentralized network at lightning speed – and cheaply at that.
On the positive side, it opens up the possibility of democratizing the financial system, especially through microtransactions. Likewise, stigmatized (again, not entirely for unjustified reasons) nations like Russia could use an XLM-like system to bypass the US dollar.
However, the currency would be decentralized and take power-hungry people like Putin out of power. However, removing the decentralization component would remove most of the conveniences associated with open source blockchains.
People need structure
Back to Ashworth’s point, I appreciate the dissatisfaction of young people – and large numbers of people – with big banks. My colleague said that big banks are not your friend. It is really true. But I’ll argue that decentralization isn’t necessarily your friend either.
Before you get your pitchforks out, decentralization is just a concept. It doesn’t have innate moral qualities like friendship. Over time, as these young people get older, they may come to realize what gives the US dollar its real power: not gold, not monetary policy, but the military-industrial complex.
You play or you die.
And basically, while we can complain about our policies, your U.S. passport means that other people will die if they mess with you. We secretly appreciate this structure, this insurance. Cryptos like Stellar – for better or for worse – lack this power. It’s bizarre. It can never push its way to the top of the line like the greenback.
With that, XLM – despite all its glorious innovations – is at the mercy of market dynamics. As investors lose their appetite for risky investments, it may be time to take a break before planning your next steps.
At the time of publication, Josh Enomoto held a LONG position in XLM. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s posting guidelines.
Josh Enomoto, a former senior business analyst at Sony Electronics, has helped broker key contracts with Fortune Global 500 companies. Over the past several years, he has provided unique, critical insights into the investment markets as well as various other industries including law, construction management, and healthcare.