The world has been relying on the US dollar as a reserve currency for decades now, not to mention that it is one of the strongest currencies in the world. As far as Bitcoin and its potential magnitude are concerned, many experts believe that the digital currency could threaten the global dominance of the dollar. It is no news that Bitcoin and other cryptocurrencies have gained significant recognition as a growing number of people have opted for cryptocurrencies for the current financial system.
It remains to be seen whether the devaluation of the US dollar will continue in the long run. The dollar has been threatened by debt but will it lose its position as a global reserve currency in the future? The current competition between Bitcoin and the dollar could push down currency dominance.
For this reason, we probably need to consider why the dollar is so predominant. While other nations may want to avoid a dollar-based financial system, de-dollarization is difficult because of the superiority of the currency. In return, it has given the United States enormous financial and geopolitical power.
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How has the erosion of dollar dominance affected Bitcoin?
The dollar is depreciating because, as such, it has not acted as a great hedge against inflation. The US financial system has taken advantage of the currency reserve position and has printed large amounts of dollars.
Due to the epidemic alone, the U.S. Treasury printed one-third of the currency last year. It is clear that these inflation rates have been caused by the direct effect of the extra money printing, which has led to the depreciation of the dollar.
Recently, Michael Seller, CEO of Microstrategy Inc., a software maker, talked about Bitcoin acting as an inflation hedge. In fact, Saylor has compared Bitcoin to a real-estate-like price, which for the most part only appreciates the future and actually sells their dollar treasury as well.
It stressed how the circulation of Bitcoin will only see an increase as the dollar continues to depreciate.
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The choice of the Saudi yuan over the dollar is a big push for the dollar
The Chinese currency, the yuan, favored the dollar over Saudi Arabian oil sales. The Saudi move would have a profound effect on the dollar and, in turn, significantly boost the Chinese economy. This growing tension between Saudi Arabia and the United States could erode the dominance of the dollar and adversely affect the petro-dollar economy, which has stood firm for four decades.
The United States has imposed sanctions on Russia over its aggression in Ukraine, which has prevented Americans from doing business with Russia. These harsh Western sanctions have pushed Russia toward a de-dollarisation initiative aimed at creating a non-dollar financial system.
It primarily restores the notion that the dollar is not as stupid and reliable as it once was, and that the world urgently needs a new anchor currency, which may be through decentralized cryptocurrency.
This brings us to the final point of our debate. Whether choosing a cryptocurrency over a Fiat currency is a viable or sustainable option considering the banking partners needed for a crypto exchange. These banking partners are responsible for converting these virtual currencies into fiat money, such as dollars or yuan.