Could Bitcoin Really Replace The US Dollar?
Over the last two months, Bitcoin has been one of the most lucrative investment assets to invest in. Bitcoin went up from around $20,000 to just shy under $40,000 as of the date of this article. And for that reason alone, crypto enthusiasts around the world are celebrating digital assets that are brought to us thanks to blockchain technology. Moreover, traditional investors are now starting to explore the crypto world and institutional investors are dropping billions in Bitcoin, “Institutional FOMO (fear of missing out), which helped drive bitcoin’s impressive rally upwards. However, even will all the belief in the possibility of bitcoin become a main investment asset in investment portfolios. The question still remains:
Could Bitcoin Replace The US Dollar one day?
The reason this question is so heavily debated is mainly due to the fact that crypto enthusiasts argue that the US Dollar is loosing it’s credibility as an asset since the more money the federal reserve prints the more the US dollar as a currency is devalued. And this doesn’t happen with Bitcoin since the digital asset currency has a finite amount of around 21 Million Bitcoins. This means that the value of Bitcoin will always be determined by what people perceive it to be. Furthermore, this idea of decentralization, which is possible thanks to blockchain technology, allows for the public to have control over their money and how it is valued rather than have the value dedicated by a government. On the other hand, traditional investors and governments feel the opposite. They believe that because Bitcoin is so volatile it will be difficult to maintain as a currency. One day you could take a loan for a mortgage that costs you $250,000 and then a short while later that could fluctuate and you could end up owing $2,500,000. Another argument also explains that because Bitcoin has a finite amount and is not backed by real world assets such as gold, it would not be able to meet the demands of growing economies. This posses another challenge.
All of these arguments essentially point towards the concept of decentralization in finance. Decentralization of the financial system brings us to a new era of technology much like the online era that was brought to us by the internet that allowed the decentralization of many parts of our society such as, retail, trade, and every day services. Therefore, it only seems natural that the way we use money be revolutionized in the same way. However, when it comes to money. There is a bigger challenge. With all the advantages that are presented by decentralizing money through blockchain such as; low transactions costs on transfers, faster speed of transferring money in seconds rather than days, and allowing people who can’t afford banking fees to be able to hold money on blockchain wallets. The challenge of security makes it difficult for governments to adopt blockchain for finance. Many transactions can be done for illicit purposes, and making sure that people pay taxes could be difficult to manage.
In conclusion, it seems that as the general public starts to believe more in Bitcoin as a means of storing money then the more bitcoin’s value will go up. And as bitcoin’s value goes up, governments around the world will start to find ways to adopt blockchain technology for finance. And this cycle in itself will most likely allow governments to find realistic ways to create a system that support digital assets on the blockchain.
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