BITCOIN THE WORLD’S RESERVE CURRENCY

Bitcoin is on track to becoming the world’s reserve currency. Bitcoin was launched in 2009 on a cryptography mailing list. As the Bitcoin network grew the community shifted to Bitcoin Talk forum. Bitcoin became a currency when 10,000 Bitcoins were sold for 2 large pizzas which is currently worth close to $250,000,000 US dollars at the time of writing. Fast forward to 2022 Bitcoin is your common bankers dream with 1 Bitcoin priced over $20,000 US dollars. Two countries, El Salvador and Central African Republic have adopted Bitcoin as their legal tender. Some people believe that Bitcoin will eventually become the world’s reserve currency, and it looks like global adoption is progressing.

What is a Reserve Currency?

A reserve currency is a foreign currency that is held in large quantities by governments and institutions in their foreign exchange reserves. A reserve currency is used to settle international transactions and is often seen as a hedge, a safe haven asset, during times of high inflation and other economic uncertainty. With several countries now holding bitcoin you could say Bitcoin is a reserve currency.

Bitcoin: How Can BTC Become The World’s Reserve Currency

Hal Finney’s legacy is immutable as he was the first person to receive a Bitcoin transaction. If Bitcoin is a religion and Satoshi is a god, some might say that Hal Finney was a prophet. Hal predicted would someday become a reserve currency: “Ultimate fate of Bitcoin, to be the ‘high-powered money’ that serves as a reserve currency for banks that issue their own digital cash.”

There are a few reasons why Bitcoiners believe that Bitcoin could eventually become the world’s reserve currency.

Bitcoin is a decentralized asset, which means that it is not subject to the whims of central banks or governments. This makes it an attractive proposition for countries whose economies are often unstable. Nations facing economic sanctions often suffer from currency devaluation, and Bitcoin could provide a way to trade freely.

Second, Bitcoin is a decentralized global network and can be used to settle fast, secure, and inexpensive transactions anywhere in the world. This makes Bitcoin a very useful tool for international trade. Bitcoin has no borders and can be sent anywhere in the world without restrictions. A million dollar payment could be sent from the USA to India with faster settlement times and cheaper transaction fees than using a bank. The BTC lightning network also makes it cost-effective to send Bitcoin globally.

The third reason is that Bitcoin’s supply is limited, and there will only ever be 21 million bitcoins in existence. This makes it a deflationary asset, which is attractive to investors who are looking for a store of value. The importance of a limited supply for a global reserve currency cannot be overstated. This is because monetary manipulation is much harder when the supply of the currency is limited.

Finally, as more and more people adopt Bitcoin, its value is likely to increase, making it an even more attractive investment for those looking to store their wealth in a safe haven asset.

Inflation is corrosive to purchasing power, so an asset that is not subject to inflationary pressures is very appealing in today’s economic climate. This is especially true for other nations such as Turkey which experienced a 78.6% inflation rate (June of 2022).

Even other first-world countries are experiencing near double-digit inflation rates, so the appeal of an asset like Bitcoin is clear. This past year, the inflation rate in both Canada and the U.S has increased monthly peaking over 7% and 9%. Inflation has stabilized but the trend looks likely to continue up in the coming future, which could further increase the appeal of Bitcoin as a global reserve currency.

“Fiat currency always eventually returns to its intrinsic value — zero.” — Voltaire

While there is no guarantee that Bitcoin will become the world’s reserve currency, it certainly has the potential to do so. As global adoption increases and more countries start to use Bitcoin as a legal tender, we could see the world’s reserve currency start to shift from fiat to Bitcoin. Only time will tell.

BTC: Legal Tender For The Unbanked

In recent years, we have seen a growing trend of countries adopting Bitcoin as legal tender. This is a significant development as it shows that governments are starting to recognize the potential of Bitcoin. The first country to adopt Bitcoin as legal tender was El Salvador in September of 2021. This was followed by the Central African Republic shortly after.

The adoption of Bitcoin as legal tender is a positive sign for the future of cryptocurrency adoption. It shows that governments are starting to take Bitcoin seriously as a potential global reserve currency. This could lead to more countries making Bitcoin legal tender in the future, which would increase its global reach and adoption.

We briefly mentioned the lightning network earlier. To explain in more detail, the lightning network is layer-two blockchain built on top of Bitcoin. It serves the purpose of increasing the scalability of Bitcoin by allowing for instant, cheap, and secure payments.

The lightning network is still in its early stages but is growing steadily. This is because Bitcoin allows people to become their own bank. In some countries, it’s not possible to attain a bank account so people are turning to Bitcoin and the lightning network. With the ability to create economic empowerment for individuals, we could see the mass adoption of Bitcoin as legal tender.

El Salvador’s president Nayib Bukele created a well thought out plan for his country’s future using Bitcoin and the lightening network. Cash remittances are up to 24% of El Salvador's GDP worth $6 billion dollars. Transaction fees for sending these remittances are costly. While using the lightening network these remittances are nearly free. El Salvadorans all over the world can now send instant and inexpensive transactions back home over the lightening network or using a Chivo ATM.

Bitcoin: The World’s Reserve Currency, Medium of Exchange, or Both?

Bitcoin has often been criticized as a poor form of money because of transaction settle times due to block size. However, applications such as Strike or Muun wallet using the lightening network are proving that Bitcoin can be more accessible to the general public. These applications allow for easy payments in Bitcoin without having to understand the underlying technology.

As mentioned, we are already seeing nation-states such as El Salvador and The Central African Republic adopt Bitcoin as a national reserve currency. Merchants and shoppers are able to transact Bitcoin seamlessly as legal tender. The technology works. And it could work throughout the world, not just for those that are unbanked or for nation-states with economic uncertainty.

No country is immune to inflation when its reserve currency can be debased through artificially printing more of it. Some currencies are stronger than others but remittances, currency conversion fees, and other issues make it difficult for the average person to use them.

Bitcoin has the potential to solve these problems and become a global reserve currency that can’t be debased. As more and more nation-states understand the immutable portability of Bitcoin, we will likely see more adoption.

Bitcoin The World’s Reserve Currency: To Be Continued…

We also have to remember that Bitcoin is still in its early stages of development. It is not yet fully adopted or understood by everyone. This means that there is still a lot of room for growth. As more and more people begin to adopt Bitcoin as a means of payment, global adoption will progress. If more countries start to follow suit, we could see Bitcoin become the world’s reserve currency.

The story of Satoshi and BTC continues as the value of fiat currencies continues to decline. It’s up to government policies and fiat currencies’ ability to prolong its survival. The question is, can they? And for how long?

These are the questions that we must ask ourselves as we watch the story of Bitcoin and the global economy unfold. Only time will tell what the future holds for Bitcoin, but one thing is certain: it has the potential to become the world’s reserve currency.

What do you think? Could Bitcoin become the world’s reserve currency? Let us know in the comments below and please share.