Can Bitcoin Replace the US Dollar?
Next year marks the 80th anniversary of the Bretton Woods Agreement, which established the US dollar as the world's primary reserve currency. To this day, many countries continue to hold large reserves of USD, and as forex traders know well, the major forex currencies are considered major because the USD is part of the pair. currency.

Nearly 80 years later, we enter a space that resembles the eye of a digital currency storm. Bitcoin – the most famous and dominant of all digital currencies – has a market cap of $383 billion and is so actively traded that it is widely recognized as a legal property. First mined in 2009, the digital currency really opened the doors of the financial world in 2017 – a time when the price of digital currency skyrocketed to nearly $20,000 per coin.

After the March 9 hearing of the Subcommittee on Digital Assets, FinTech and Inclusion, it is a good time to reopen the debate that has attracted much discussion. in financial offices and exchanges.

Can Bitcoin Replace the US Dollar?

Four Arguments in favor of Bitcoin Displacing USD One Day

  • Decentralized
Bitcoin is a decentralized currency, meaning Bitcoin is not controlled by any government or central authority thanks to blockchain technology. This form of digital distribution has become so popular, in fact, it has penetrated industries beyond finance such as healthcare and real estate.
This combination of decentralized technology and blockchain gives Bitcoin resistance to corruption, while also giving Bitcoin a degree of autonomy that is not possible with government-backed currencies. . For Bitcoin believers, this is what will pave the way for the currency's inevitable clash, and eventual replacement of the US dollar.

  • Limited supply
The nature of Bitcoin is finite with a limited supply at 21 million coins, which makes it difficult for Bitcoin to deflate. Bitcoin advocates see this as a big advantage as the value of Bitcoin can increase with demand while supply is low, eventually leading to the replacement of the USD as a store of value. more stable and reliable.
In contrast, the USD is an inflationary currency because its central bank – the Federal Reserve – can print more money whenever it deems necessary. Bitcoin advocates believe that this characteristic will over time depreciate the value of the USD.

  • Global acceptance
Global adoption has been slow, especially at the national level as only El Salvador has so far accepted Bitcoin as a fiat currency. Even proponents of Bitcoin's future dominance will argue that great things start small.
Major brands like Microsoft (NASDAQ:MSFT), Tesla (NASDAQ:TSLA) and Whole Foods have accepted Bitcoin as a legal form of payment. As adoption grows at the commercial level, Bitcoin could become a more widely used currency and even potentially replace USD in some countries.

  • Security
Ultimately, Bitcoin advocates believe in advanced currency encryption techniques to ensure secure transactions, as well as protect user privacy. Thanks to the blockchain and the use of a decentralized ledger to record transactions in an immutable manner, Bitcoin is more secure than traditional payment methods, which are vulnerable to hacking and fraud.
When security and privacy are higher, transparency and accountability will also be higher, not to mention cross-border transactions also become faster and less expensive. Coupled with the growing global acceptance, freedom from government coercion, and the deflationary nature of Bitcoin, you get a powerful enough tool to one day replace the US dollar. heroic.

Four arguments against the possibility of Bitcoin replacing the USD one day

  • Volatility level

The value of Bitcoin is highly volatile, which makes Bitcoin unsuitable as a stable store of value. There are many instances where Bitcoin's value can spike – Bitcoin went from $7,000 to $10,000 in just a few weeks in December 2019 – or plummet – in May 2021. , Bitcoin plummeted from $60,000 to $30,000 in two weeks.

In contrast, the USD is stable and maintains its value for decades. Investors and speculators may find Bitcoin attractive, but the average person is not risk-averse. Until Bitcoin can demonstrate long-term stability, it will never be able to replace the USD.

  • Lack of regulations

Perhaps the most troubling thing is the lack of regulation for Bitcoin. The hearing that took place on March 9 of the Subcommittee in charge of Digital Assets caused the digital currency to drop in price to the point where the value of Bitcoin dropped to a 7-week low. On the same day, Gary Gensler, Chairman of the US Securities and Exchange Commission, released an article expressing his disparaging view of cryptocurrency companies, stating in short that they are “subject to regulation.” to adjust or die".

Since Bitcoin operates outside the compliance framework of most governments, its integrity can always be questioned. And it would be difficult for ordinary consumers to use such a currency.

  • Acceptance and ease of use are limited

While supporters cite the growing adoption of the coin, Bitcoin distastefuls point out that the coin is not widely accepted by the vast majority of merchants. . They will also remind you that the only country that accepts Bitcoin as fiat currency, El Salvador, has a murky history of corruption.

This little accepted reality coupled with the fact that Bitcoin is difficult to use to pay for goods and services is not a good demonstration of Bitcoin's usefulness as a currency, which makes Bitcoin can hardly replace USD in the near future.

  • Government intervention

The most notable takeaway from all the activity that took place on March 9 is this: there is still a dark cloud over digital currencies like Bitcoin. While not ignoring the transformative potential of blockchain, the US government is not yet ready to embrace digital currency.

While China has outright banned digital currencies, countries such as the US, Japan, the United Kingdom, and Switzerland have put in place strict regulatory barriers around digital currency trading. If governments take full control of Bitcoin, the digital currency will face serious obstacles in usurping the US dollar.

So what is the answer?

Both arguments make sense, so the answer really depends on your personal perceptions and beliefs about Bitcoin and its future potential. Clearly this coin is a breakout player, but is it strong enough to usurp the world's main reserve currency, which has ruled for almost 80 years?

Only time will tell, but one thing is for sure: it will take many years for most countries and people around the world to consider Bitcoin as a common currency if it continues. decentralized and unregulated manner.