Undoing Global USD Dependency With Bitcoin
By Sankalp Shangari on ALTCOIN MAGAZINE
To truly understand the mass adoption of cryptocurrencies, we need to first take a look at the global economy and try to understand how it seems to operate. Since the 1944 Bretton Woods agreement, the dollar has been dominating the world economy as the most preferred currency for trading fiat as well as crypto.
The present reality is that the US government is rectifying its mistake of pushing a lot of liquidity into the system that led to the 2008 crisis — by pulling it back. On the other hand, other strong currencies like the Yuan, the British Pound, and the Euro are observing an upward curve when we look at its liquidity graph. This imbalance in the liquidity of USD and other currencies is causing further strengthening of the US dollar.
In fact, the past few weeks have seen a lot in the form of an ongoing trade war between the USA and China. This development is becoming increasingly aggressive which is causing USD to strengthen even more. Most emerging markets are also greatly dependent on the USD for their international trading. It’s a great cause of concern since significant economic events like Brexit, Hong Kong protests and inverted US Curve are highly likely to cause equity scarcity, recessions and dwindling liquidation of emerging markets. Additionally, dependency on one currency or system which controls everything has always proved to be a disaster.
The recession environment that stands at the horizon will soon be our reality within the next 16–18 months. In that reality, gold will continue to remain on top of the list of the most important store of value. What I am trying to advocate here as a crypto-enthusiast is that Bitcoin and other strong cryptos should also be viewed as safe havens in times of economic crisis.
This has never happened before but there are so many developments that are going on in the world that has never happened before. Blockchain and cryptos have given rise to a whole new narrative. The world had never seen corporates and major banks come up with their own currencies.
Banks like Goldman Sachs and JP Morgan are already in line to introduce their own cryptocurrencies. The same is the situation with major corporates like Facebook, Binance, and Walmart that plan on creating their own stable coins.
Coming back to the dependency on USD, in the scenarios of lack of liquidity of USD and the need to have a store of value, even the governments will eventually start searching for a store of value. Followed by gold and USD, Bitcoin will prove to be that store of value. In fact, if we look at investment and savings options that are chosen by people today like pension funds, etc., even they are looking at BTC as a store of value. Even if 1% of the funds of these investment options flow towards BTC, there is a huge potential for increased pricing for BTC.
This is surely a piece of great news for HODLers. However, BTC as a store of value alone can’t achieve this because of its scarcity along with lack of diversity. This implies funds need to be directed towards other alternative coins as well that have proper use cases. For instance, Ripple, BNB, Ether, COS Token, etc. that can provide some substantial economic benefits.
Other than that, this is to be kept in mind that about 90% of altcoins will die a gradual death because as we all know it, not every cryptocurrency has some real use cases or the ability to generate value. When we talk about the mass adoption of cryptocurrencies or viewing cryptos as a store of value, we don’t mean ‘all’ cryptocurrencies.
We are solely talking about the cryptos that’ll survive till the end in the race of survival of the fittest. These winner currencies would be those which give back to the community the most. It necessitates the blockchain projects to come up with new and innovative products that’ll serve the community the most and prompt mass adoption of cryptos.
Additionally, it is still a long way to go for cryptos to be perceived as a store of value because they need to evolve infrastructurally to adequately accommodate the needs of the economy. In present times, the upcoming blockchain projects are genuinely bringing in innovations in contrast to the ICO gold rush of 2018. All of us are well aware of what happened back then.
However, I will definitely not state that innovation is enough to prompt the mass adoption of cryptos. Another important ingredient required to reach that goal is awareness. This awareness may be created by good and bad publicity both. For example, people will eventually come to know of Bitcoin if they read the news of a government like that of Switzerland issuing Asian banking licenses on crypto. Or when they read about the arrest of a man caused by the ban on crypto levied by the RBI of India.
As Mark Anderson said for blockchain,
“We are in the 1992–1993 era of the internet where it was about to take off as a mass adoption technology”.
I see 2019 and 2020 as the year where we prepare ourselves for huge mass adoption of blockchain. We need to get ready as we are about to reach the cusp of a technological revolution.
The Internet took 20 years to gain mass adoption but blockchain will take less than time (maybe 5–10 years, let’s see) because of technological advancements of the past 20–25 years. In COSS, we are building for those 10 years.
In my opinion, we are in for a ride witnessing the new narrative of the growth of blockchain and mass adoption of BTC and how crypto is giving back to the community. This is what eventually will lead to the decreased dependency on one system and one currency and make the global economy more stable and decentralized.