Can Bitcoin become the world’s currency? Some people think Bitcoin could become the world’s reserve currency. Here’s why.
The US dollar has enjoyed the world’s reserve currency status for many years. However, some individuals argue that Bitcoin could eventually take this position in the current and future digital ages. Currently, many individuals and institutions have lost faith in conventional money. Traditional currencies are subject to manipulations by national governments through their central banks.
Bitcoin is an independent and decentralized currency. It runs on blockchain technology comprising a network of decentralized nodes or computers that confirms and validates transactions. Essentially, no entity can manipulate Bitcoin’s production or distribution alone. Changing the Bitcoin protocol that limits the number of coins that can ever exist requires a consensus of all participants.
Additionally, cryptography technology makes Bitcoin transactions tamper-proof. Thus, nobody can reverse or alter the details of a Bitcoin transaction upon its validation and addition to the blockchain. Such traits make more individuals and institutions trust and love Bitcoin.
But the absence of a centralized issuing and regulating authority makes Bitcoin a highly volatile currency. Consequently, some people purchase and sell Bitcoin for profits. Platforms like Bitcoin Clever facilitate Bitcoin trading, making it a popular economic activity. Today, you can register with such avenues, load your crypto exchange account with funds, and trade Bitcoin.
Skeptics argue that Bitcoin can only be a tradable commodity and not a world currency due to its volatility. However, some individuals and institutions believe that Bitcoin will eventually become a global currency. Here’s why.
Many experts believe that blockchain, Bitcoin’s underlying technology is a major revolution that will transform many economic sectors as the internet did. The belief that Bitcoin has more applications than in the cryptocurrency world makes many people believe that this virtual currency will eventually replace the US dollar as the world’s reserve currency.
The world is moving towards digitization on many fronts. Bitcoin being a digital currency means its use and acceptance could eventually increase. And this is becoming apparent as more merchants accept Bitcoin payments due to their advantages over traditional transactions.
Bitcoin’s price fluctuates dramatically due to the lack of a central regulating authority. However, its value has increased since its inception and introduction in 2008 and 2009. Anyone who bought or mined Bitcoins in 2010 and held them in their crypto wallet can sell them at a higher value than they spent back then.
On the other hand, the US dollar’s value has reduced, thanks to the expansionary monetary policy by the Federal Reserve. Before the Covid-19 pandemic, the dollar was the preferred international trade medium. Most central banks worldwide hoarded the US dollar as value storage and reserve currency. However, the rising US debt and low-key interest rates have caused alarm bells to ring among banks and investors globally.
The dollar has retained its reserve currency status due to the belief by investors and banks that the US can pay the bills for it. However, the US government’s debt has made many investors and banks doubt this capability. Currently, the US debt is 67% of the country’s GDP.
The US dollar might relinquish its status as the world’s currency, especially with the rising US debt. However, Bitcoin will have to go a long way before taking this position. Currently, Bitcoin’s volatility limits its use and adoption by most merchants. Also, many countries don’t know whether to treat Bitcoin as a currency or an asset.
Only a handful of nations, like El Salvador, accept Bitcoin as a legal tender or currency. In some countries, this virtual currency is illegal. Thus, Bitcoin has to prove its usability as a currency and the ability to retain value for it to become a global currency.