Cryptocurrency, Human Emotion, Banking & How it all Ties Together

Human emotion plays a significant role in finance, specifically within the stock market, real estate and various products or services. However, the eruptive emergence of cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH) and even playful creation of financial tools like Shiba coin (SHIB) and Nonfungible Tokens (NFTs), has further caused the value of the currency to be contingent upon human emotion. Just as stock prices rise and fall according to real-world events and human reactions to said events, the value of cryptocurrencies is also dependent upon human emotions and reactions in tandem with faith (or lack thereof) in traditional markets and government oversight.

The intended purpose of cryptocurrency is to decentralize currency and transfer control and responsibility to individual currency holders, , but this shift comes with a tradeoff: the crypto market is significantly more volatile than the traditional trading market. The volatility allows for higher returns, but it also creates far greater loss margins. However, many cryptocurrency enthusiasts advocate that cryptocurrency is more stable than fiat currency because the value of cryptocurrency is solely based on the people’s perception of its worth rather than government intervention.

The incorporation of the blockchain makes cryptocurrency unique compared to traditional fiat currency. Blockchain technology creates a public ledger of every transaction making it virtually impossible for fraud to occur. Unfortunately, the lack of government oversight limits opportunities for traditional, government-backed financial institutions to participate in the various digital currencies.

This all leads us to where we are today: traditional financial institutions are struggling to find ways to service the growing number of crypto-curious clients. Unfortunately, the traditional banking institutions’ rigid processes and compliance constraints make it difficult to provide products and services that leverage the revolutionary currencies.


The Federal Reserve is currently researching the implementation of Central Banking Digital Currency (CBDC) as a method of keeping up with digital currency trends. In fact, countries such as Sweden and the European Union  are in the process of adopting the CBDC format. The efforts seem to be investigating a new form of currency that will essentially create a digital US dollar which could facilitate faster processing, exchange and ACH capability. However, the CBDC format does not incorporate Blockchain technology, thus the risk of fraud would remain.

Will the institution of CBDC help traditional financial institutions integrate cryptocurrency markets? Unfortunately, the short answer is “no.”


How can traditional financial institutions mitigate risk while finding a niche within a decentralized system of currency?

Companies like NYDIG are at the forefront of innovation in terms of merging cryptocurrency with banking. NYDIG is a bitcoin company that fuses high-tech processes with institutional-grade finance to usher in a new era of financial products. The company offers Bitcoin accounts, payments and payroll options. NYDIG also recently partnered with US Bank to offer Bitcoin based institutional investments.

Other institutions, such as Silvergate Bank, are also offering unique ways to incorporate cryptocurrency. Sivergate Bank is offering a dollar-backed digital currency to their clients. This type of digital currency falls into the category of stablecoins, which are typically more “stable” because they backed by a traditional fiat currency. This stability most often mitigates some of the large value fluctuation.

The use of stablecoins is seemingly the first, and arguably the most significant step towards incorporating digital currency into the traditional banking world. However, digital currency advocates do not want traditional financial institutions, nor the government involved at all. Digital currency was created, in many ways, to be the direct antithesis of traditional banking.  The increasing distrust of traditional financial institutions, nefarious government interference and skyrocketing inflation rates have created new levels of distrust through each generational community.

Trends in banking are undoubtedly shifting. Fortunately, the path forward is becoming increasingly clear. The industry is learning from its practices and regulators and financial institutions are adjusting accordingly. There is no universal playbook for introducing cryptocurrencies more widely, but the financial enterprises that are first to design and implement viable approaches are slated to become industry leaders.