Cryptocurrency has advanced beyond the marginal system it was just a decade ago. In the past five years, in particular, crypto — led by Bitcoin — has made huge leaps, closely outpacing the daily lives of people around the world.
Last September, El Salvador became the first country in the world to adopt bitcoin alongside its main currency, the US dollar. Many crypto enthusiasts rejoiced, at the time, as they viewed the Central American nation’s bold move as the first sign of the dollar’s replacement. Many still believe in this.
But how realistic is it to believe that the world’s most powerful currency – the US dollar – will be acquired by Bitcoin or any of the thousands of other cryptocurrencies in circulation?
What do the proponents say?
One of the biggest proponents of Bitcoin is former Twitter CEO Jack Dorsey, who sings praises of the cryptocurrency every chance he gets. Just last month he responded to a question on Twitter from rapper Cardi B, who asked “Do you think crypto will replace the dollar?” To which Dorsey simply replied, “Yes, Bitcoin will.”
In August 2021, Dorsey made a bold prediction about Bitcoin, claiming that it would unite America and then the rest of the world.
Dorsey now works for the payments company he owns, called Block, which includes the Square and Cash app, and has rolled out Bitcoin-based services.
This week, chess master Gary Kasprovov hailed the digital currency as the future and said he wouldn’t be surprised if cryptocurrencies replace the dollar within ten years. The chess champion described bitcoin as “digital gold” and said it was a good buffer against rising inflation.
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The case against encryption
One of the biggest problems facing cryptocurrencies is the high rate of volatility. In the past year, Bitcoin has seen a growth of around 60% but there has been extreme volatility in between with the coin reaching $69,500 in November and as low as $29,000 during the market crash.
The other thing the cryptocurrency seems to be lacking is the global consensus on its true value. Countries like China have imposed an absolute ban on all cryptocurrency trading, mining and even holding. The Chinese government has criticized cryptocurrencies such as Bitcoin as having no inherent value. This sentiment has resonated in a number of places around the world, including Egypt, Morocco and Oman.
In addition, the notion that cryptocurrency is the great equivalent and democratic form of finance has been challenged. A study by the National Bureau of Economic Research last year found that only 0.01% of bitcoin holders own 27% of all bitcoin — a far cry from the people’s, people’s, and people’s currency.
Of course, it is difficult to accurately predict the future of global finance, let alone predict whether a currency that has been around for centuries will ever be replaced by a currency that has been around for just over a decade.
The very existence of Bitcoin and other cryptocurrencies already provides an alternative means, the usefulness of which will only grow as more and more companies and businesses accept it as legal tender.
Perhaps the question of whether it will replace the dollar is an ambitious vision of these crypto-supporters.