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Bitcoin as a world reserve currency. Is it possible? feasible?

In the present financial market, it appears that we are nearing the point of collapsing, while the current world reserve currency -- the US dollar, keeps falling every year. Does this mean that the current system is about to come to an end, and the world will require an entirely new reserve currency for the world?


Bitcoin and Blockchain have revolutionized the financial world and offer the most efficient solutions for traditional finances tied to and controlled by rich countries and individuals.




What is Bitcoin?


When it comes to cryptocurrencies, Bitcoin is the unrivaled monarch sitting in the top position. Bitcoin's idea dates as far back as 2008 and is the work of a pseudonymous computer programmer named Satoshi Nakamoto. Bitcoin is the first cryptocurrency.




The way cryptocurrencies function is by creating and distributing transactions in a distributed ledger that is known as blockchain. The authenticity and security of these transactions are verified through cryptography.




Bitcoin can be used as an alternative to currency as well as a place to store of value just like gold. Since when it was launched in 2008, the price of bitcoin has increased by an enormous margin. When a Bitcoin is divided up into 8 decimals, that's known as a Satoshi. As of now, the value of the bitcoin is $20780 USD. It has even reached $64400 USD in one instance.




What bitcoin and bitcoin's cryptocurrency is in the position to do is amazing.




Designing pathways for decentralized finance to save economies from inflation, working against powerful Internet monopolies as well as opening the way for technological advancement are just some of them.



Reserve Currencies


Reserve currency refers to any currency that is kept in large quantities and is maintained by large financial institutions. These currencies are used to influence international exchange rates, investments loans, investment portfolios, and even trade transactions.





The biggest reserve today was the US dollar.




This is because the majority of metals like gold have their value in USD. The power of USD is massive, with 58.81 percent of all global reserve of fiat assets in 2021 to their names. This race's runner-up to the USD is Euro with 20.64%. Before USD was able to take over the top spot with 20.64%, the British pound was the top reserve currency up until 1925.




A lot of economists and financial experts are of the opinion that the time span of a dominant currency is about 100 years. They have also suggested that the power of the USD is now in its final years , and that it will begin to wane.




Numerous reasons can result in a dominant reserve currency dropping its importance. Conquest, war, inflation and new alliances, and excessive money printing are just some of them. We know about reserve currencies lets take a look at how the USD became so strong.



World's main currency US Dollar


The major reason for increasing the USD was the occurrences of World War 1. When this war began, allies suffered from being cornered and were forced decide to go to USA to purchase their crucial war-related supplies. They then were able to pay for these supplies by massive amounts of gold. This enabled America USA to be the largest owner of gold in world.



It was a significant driving force in backing the power of the US dollar. However, during World War 2, the US was the largest economy and its competitors had to concentrate on war. Also, the destruction caused by the war to the cities of these countries would also benefit the USD.




This led to countries depending on the US for funds even more. In addition, many countries asked requests for credit from US and the US accepted loans with low interest rates. In the end, when the wars were over, the USA as well as the USD were on top of the world financially.



The Dollar is replacing gold


In 1971 The year 1971, the US began printing currency at a rapid rate in order to fund their war effort in Vietnam. This led to other countries becoming cautious and began changing their dollars back into gold. This led the acting president and, later, Nixon, President Nixon to break the bonds between gold from the USD.




After the demise of gold, USD remains the predominant currency because of the wealth which other countries have amassed. Although dollar as reserve currency was not as strong when it was first introduced, USD is now primarily backed by the US Treasuries.



The decline of the Dollar


Decoupling from gold was one an initial step towards the fall of the US dollar. The downfall started to accelerate in the wake of the financial crisis of 2008 along with the covid-19 pandemic of 2020.




It is believed that the Federal Reserve System and the US government had to contribute the bailout amount of $7.77 trillion for the economic crisis to secure banks and the entire financial system. The amount grew to $9 trillion in the time of the covid pandemic and the value continues to climb.




From the events of 1971 to the pandemic alongside increasing inflation and money printing is bound to decrease the value any currency. Countries like China as well as Russia have already started their pursuit of alternate currencies and are currently working towards creating Central Bank digital Currencies.




The issue with a nation's currency being the reserve currency is the power it grants the country that is the owner that the currency. USD is an excellent illustration of this. Many countries already have been vocal about their concerns about how the US has increased the power of the Dollar.




For instance, if an electronic transfer in USD requires settling, it requires approval from a US bank. If they select an option to do so, the US can stop these transactions. This is a major fact that will cause the downfall of the US dollar.




Following the breakup of gold from the USD the gold was not even close to reaching its original value again , but it dropped. The USA went from being the largest creditor in world , and then became the one with the largest debt and trade deficit.



The Rise of the Bitcoin


As the inevitable fall of the US dollar, some countries are starting to distance themselves from the reliance on dollar. Paraguay along with Argentina have already begun to use Bitcoin to settle trade deals.




However states like Venezuela have allowed bitcoin in commercial transactions both in the country and globally. Additionally, dollar reserve currency and South America are becoming more crypto-friendly. Malaysian officials are taking legal action to implement bitcoin.




A suggestion made by China and Russia back in 2009 says it is recommended that all nations replace USD as the reserve currency and search for a currency with none of the ties to any nation.




The closest thing we have to an actual currency that we currently have is bitcoin. Furthermore, Russia recently even stated that they're willing accept bitcoin as a payment method for oil-related resources such as.




The adoption rate and the cost of bitcoin have soared since its beginning. Despite certain price drops in recent days due to the pandemic, experts claim that bitcoin's future is stable and it could surpass the $100000 USD mark soon.



Can Bitcoin be able to replace the Dollar?


Bitcoin is an electronic currency that has no owners. There is no chance of authorities using it to their benefit. When world's reserve currency is not owned by any government The risk of a country using it as a way to gain power is eliminated.




Another interesting fact is that the fiat currency every one of us has ever encountered has failed. And even British Pound, which was the most effective currency decreased its purchasing power by 99.5 percent.




Tragedies like inflation by excessive printing of money cannot occur with bitcoin due to its an available limit of 21 million. Furthermore bitcoin is safer in its transparency and can be moved much faster and for only a fraction of fiat's cost.




Since it's an uncentralized currency that is not controlled by a central authority, nobody can hinder, limit or restrict bitcoin to increase the cut. In addition, Bitcoin is an ultra-portable currency that's easy for anyone to carry anywhere, in contrast to other value-based currencies like cash or gold.




In addition, it is the only currency that is durable, portable, divisible, uniform, and scarce which are all characteristics of an investment that is worth it.




The good thing about bitcoin is that, while the fiat currency is subject to inflation, bitcoin has a deflation. For instance, what we can buy for $100 is considerably less in 2022 comparison to what you could purchase with the same amount when we were in 1950. The amount we can purchase for one Bitcoin in 2022 is staggeringly huge when you compare it with the similar amount of the year 2011.




Another term used frequently in this area is "Sound money" and refers to the currencies which are not subject to extreme appreciation or depreciation in value. Even if digital currencies do not receive widespread acceptance, Bitcoin could be the most reliable money in the market today.


If a state is not negatively impacted by inflation standards of living and living that its citizens enjoy is bound to rise. After all it's not a possibility , but it is only a matter of time before bitcoin will take over.



The World on Bitcoin


If a world were to be ruled by bitcoin as the central currency, it would be a completely more different from what people are seeing today. Imagine a world that is a place that is free of inflation or centralised authorities manipulating currency for their own gain.




Fairer distributions of money and a reduction of the wealth gap will result in less distrust between nations as well as between individuals. As reserve currency look discussed earlier the benefits of a solid money system in the economy will surely to improve the way people live their lives.




Lowering the cost of corporate bailouts or borrowing funds based on promises will raise the corporate and financial accountability of companies and governments.




In addition, bitcoin can restore the equilibrium of global equity markets .



Why isn't it easy?



While all this sounds wonderful and great, the changes necessary in order for this to happen are not so easy. It is the biggest challenge humans must conquer for a better tomorrow and for the whole human race. May it be for money or to hold power, the only thing greed can do is bring about negative outcomes to the people around them.




The adage goes "don't change what's working" The majority of people fear a huge change such as this. Although the current economic system might appear to be working, that is only barely at best, and is currently in danger of collapse. The task of removing people from this mindset is a different challenge that we'll need over come.




Even though most people understand what bitcoin is and how simple it is to understand however, some people believe that the whole concept is complex and shy away from being more upfront about it.




The fact that governments have large reserves of USD is another cause that can slow the move towards bitcoin. When a new currency becomes popular and becomes dominant the hoarding nations, they will shed millions, if perhaps billions in USD. It's therefore easy to see why they are so reluctant toward new currency exchanges.




The bitcoin's liquidity and countries that are launching new Central Bank Digital Currencies (CBDCs) is also slowing the pace of change. If compared to USD, bitcoin's liquidity is much less. In addition, new CBDCs benefit from the potential of bitcoin. Even if they know the meaning of bitcoin, less informed people are certain to select their own country's CBDCs instead of bitcoin.




While these data show that the future of bitcoin as the reserve currency is dim However, there are a few positives. Many levels of Bitcoin acceptance across the globe and countries striving to be leaders in the blockchain race and possess the largest cryptos are helping this course.



Conclusion


If Bitcoin is implemented correctly, it is bound to benefit humanity. If reserve currency status becomes the primary currency for the world it will eradicate issues including currency centralization and inflation and will level the playing field. It will also aid in increasing the living conditions of the people leading to a better functioning economy.




An excellent way to repair the world saturated with corruption is the introduction of an improved reserve currency. With bitcoin as one of many of the most innovative, influential and flexible currencies around the world, there's any other choice better than bitcoin.








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