The U.S. dollar has remained to be the leading currency standard across the globe for decades now. Other fiat currencies such as the pound and euro have also been able to establish their value and market strength over the years with USD mainly leading the charge.
With the emergence of cryptocurrencies, the tendency for the current USD-dominated world market being disrupted is slowly gaining weight. In the home of the USD itself, cryptos are set to disrupt the uniform USD market in the coming time. Despite being just over a decade old, cryptos have become competitors to the traditional fiat currencies and this narrative is now being accepted by many influential personalities in finance.
In a recent presentation, President of St. Louis Federal Reserve James Bullard noted:
Cryptocurrencies are creating drift toward a non-uniform currency in the U.S., a state of affairs that has existed historically but was disliked and eventually replaced.
Developments are being made in the cryptocurrency world at a very rapid pace pushing it to rival the centuries-old banking world. Bitcoin and other altcoins are slowly gaining more acceptance and credibility owing to the capital that is flowing into this nascent space.
The underlying tech beneath bitcoin is blockchain which is already attracting a lot of intellectual capital into its ecosystem from across the globe. Bitcoin specifically is the leader of the crypto space and it has been under the lens of major tech personalities such as John McAfee for quite some time.
Bitcoin price is slowly gaining ground and it already has around $188 billion market cap, as per CoinMarketCap at the time of writing, which is often seen going up and down. As more opportunities are provided to the people to use cryptos in the real-world, the non-uniformity of currencies in the country is surely set to increase, as pointed out by James.
In the United States, the dollar is controlled by the Federal Reserve or the Fed. Statements from influential people from this institute, in particular, carry huge weight when it comes to the burgeoning world of cryptocurrencies. Recently, the chairman of the Federal Reserve Jerome Powell compared bitcoin to gold which consolidated its image as a digital asset/store-of-value. He said:
Almost no one uses bitcoin for payments, they use it more as an alternative to gold…It’s a speculative store of value.
This comment made by as influential personality as the Fed’s chairman carries extreme importance for establishing bitcoin’s credibility in the finance world as people like Warren Buffet absolutely dismiss the digital asset. It highlights that despite all the criticism bitcoin does carry some useful prospects for the future.
Although bitcoin emerged as a peer-to-peer electronic cash system, its role has pivoted more towards a store of value. It is treated more like gold and its extreme price fluctuations are often used by traders and investors to gain quick monetary benefits. Still, bitcoin has the capability to become a global reserve currency if further developments are made on both technological and regulatory fronts.
While fiat currencies such as the USD are based on the debt-based and inflation-ridden banking system, cryptos present forward an alternative. The war between USD and bitcoin thus becomes inevitable, it is between two different financial frameworks. But at the present moment, bitcoin is ridden with the burden of illegal activities. Once regulatory clarity is achieved for the asset across the globe, the rivalry is expected to become more serious than now. As James put it:
I want to view cryptocurrencies of various types as new entrants into the ongoing global currency competition.
The issues that stop bitcoin from rivaling USD are price volatility, price manipulation, lack of regulatory clarity, usage in illegal activities such as money laundering, dark-web spending, etc. In order to become a leader in global currency competition, the cryptocurrency world needs to tackle these issues besides others such as unreasonable electricity spending which is, in turn, contributing to global warming.
Right now, USD is running the operations in its home. With bitcoin and other cryptocurrencies rising in terms of popularity with giant companies like Facebook stepping into this world and launching their own cryptos, it is possible that the market situation in the United States will become more multi-polar in the coming time.