The world has relied on the US Dollar as a reserve currency for decades now, needless to say that it is one of the world’s strongest currencies. As far as Bitcoin and its potential prevalence are concerned, many experts believe that the digital currency could threaten the global supremacy of dollar. It is no news that Bitcoin and other cryptocurrencies have gained significant familarity as increasing number of people have chosen cryptocurrency ove rthe current financial system.
This topic however remains up for discussion whether the depreciating value of the US Dollar will remain so in the long run too. The dollar has been threatened by debt but will it lose its standing as a global reserve currency in the future? The current competiton between Bitcoin and the dollar could and is pushing down the currency’s dominance.
To reason this, we perhaps need to consider why dollar rose to such prominence. Other nations even if they want to avoid the dollar based financial system by opting for de-dollarisation, it is difficult because of the supereminence of the currency. This in return has given the US massive financial and geopolitical power.
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How Has Depletion of Dollar Dominance Affected Bitcoin?
The dollar’s value has been depleting, as a reason, it hasn’t acted as a great hedge against inflation. The US financial system has taken advantage of the currency’s reserve status and has heavily printed dollars.
Owing to the pandemic alone, the US treasury printed one-third of the currency in the past year itself. It is evident that these inflation rates have been caused by the direct effect of excess money printing, thereby depreciating the dollar’s value.
Recently, Michael Saylor, the chief executive of MicroStrategy Inc, a software maker company, spoke about Bitcoin acting as an inflation hedge. In fact, Saylor compared Bitcoin to have real-estate-like value, which in most cases only appreciate in the future and has infact sold their dollar treasury as well.
This emphasized how Bitcoin’s prevalence will only see a rise as the dollar continues to lose value.
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Big Blow To Dollar As Saudi Chooses Yuan Over Dollar
Suadi Arabia sided with the Chinese currency Yuan over the Dollar for oil sales. This move by Saudi would create a profound impact on the dollar and will in return boost the Chinese economy significantly. This rising tension between Saudi and USA could dent the dollar dominance and adversely affect the petro-dollar economy which stood concretely over for four decades.
Russia’s invasion of Ukraine had caused the US to impose sanctions, which restricted the Americans from trading with Russia. These stringent sanctions from the West have pushed Russia towards a de-dollarization initiative by focusing on creating a non-dollar financial system.
This primarily reinstates this idea that the dollar isn’t as foolproof and reliable as it used to be, and the world urgently needs a new anchor currency, which could be via decentralised cryptocurrencies.
That brings us to our final topic of debate. Does choosing cryptocurrency over fiat currency a tenable or sustainable option considering that crypto exchanges require banking partners. These banking partners are responsible for converting these virtual currencies into fiat money, such as Dollar or Yuan.
BTC’s uptick in the past 24 hours. Image Source: BTC/USD on TradingView