The global forex market is one of the most active entities of its type in the world. More than $6.6 trillion is traded every single day across the globe. The total value of this market peaked at a staggering $2,409 quadrillion in 2020 too. This fact is all the more staggering given that individual currencies themselves have no objective or intrinsic value.
In fact, the only value attributed to a currency is awarded by the government that issues it. While there’s theoretically no cap on how much of a particular currency can be printed at any time. This points to the intersubjective nature of currencies. But what does this mean, and how does it also impact cryptocurrency assets?
The notion of intersubjectivity describes a shared perception of reality between two or more individuals or entities. This is built on the supposition that the human mind has no capacity to know or understand reality beyond our own experiences and the five senses (namely sight, hearing, smell, and tactile touch).
This is the basis for society and national currencies. As we’ve already touched on these have absolutely no tangible or objective value. In fact, the value of individual notes and the amount of currency issued is determined by the government that issues it. There are essentially no caps at all on either supply or demand over time.
However, the values ascribed by governments drive a shared belief and consensus that currencies are inherently valuable. However, other market forces determine the wider cost of living and what specific amounts of money can buy. As currencies lack tangible value, they’re also prone to immense volatility in the FX marketplace.
This also underpins the type of inflation that has gripped the global markets since Russia’s invasion of Ukraine in February 2022. The type of quantitative easing techniques used to lower the cost of living tend to see governments print excessive amounts of cash. This then impacts directly the value and purchasing power of currencies.
Cryptocurrencies may also be described as contemporary intersubjective reality. Like their fiat alternatives, they lack objective value and see their prices impacted by a number of market factors.
Of course, the factors that impact cryptocurrencies are different to fiat currencies. Especially, as digital tokens aren’t owned or issued by a third party. So, instead of having value ascribed to them, their prices are determined by the basic rules of supply and demand, market sentiment, and the range of applications associated with them.
Remember, there are also finite supplies of crypto assets such as Bitcoin. Thus, valuations can rise and fall dramatically depending on real-time demand in the marketplace.
If we set these differences aside, we can see fiat and crypto assets are bound by the shared belief that exists in their values. This impacts everything from the consumer marketplace to social trading strategies.
In the case of Bitcoin, this intersubjective reality and the factors that impact pricing drove the value of the token up to a peak above $60,000 last October. This could subsequently fund big-ticket purchases of items that have real and tangible value in the corporeal world.
