Cash vs Crypto: Understanding the Differences

Cash is the most liquid form of money: physical coins and banknotes.

What is cash?

In the ordinary sense of the word, cash is a physical form of currency: coins and banknotes that can be carried around and used to pay for goods and services immediately.

In some contexts, the meaning of cash can expand to include bank accounts and marketable securities such as government bonds. Less strictly speaking, in finance, cash includes all currency equivalents that can be liquidated immediately or almost immediately.

Historically, gold and silver coins have long been an almost exclusive means of payment around the world: the scarcity of precious metals ensured their value, and their homogeneity allowed for easy accounting.

The emergence of paper money, which began in the seventh century AD, contributed to the gradual separation of the value of cash from the value of the material from which it was made, and the eventual emergence of fiat currencies such as the US dollar and the euro. These currencies are set as money by the government and have no intrinsic value.

Around the world, since the 1980s, society has increasingly moved away from cash, replacing it with debit and credit cards and, more recently, mobile payments. As of November 2020, the global amount of cash is about $6.6 trillion - just a fraction of the $630 trillion to $1.2 quadrillion total of all types of money.