Based on bitcoin's rapid surge, some investors are wary that it could soon edge out the U.S. dollar from being the world's reserve currency.
Based on bitcoin's rapid surge, some investors are wary that it could soon edge out the U.S. dollar from being the world's reserve currency.

How Bitcoin affects the U.S. Dollar

By Brandstories Time of article published May 27, 2021

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According to some financial markets experts, bitcoin is currently the biggest threat to the U.S. dollar's position as the world's reserve currency. However, others also say bitcoin is too volatile to pose any significant threats to the U.S. dollar. Nevertheless, bitcoin impacts the dollar in so many ways, some of which are unknown yet. The following article analyzes some of the critical features of bitcoin against the U.S. Dollar to determine its impacts on the latter.

Bitcoin price & interest

Bitcoin price has increased almost eight times since March and, financial market analysts project that it would soon climb to $100,000. As the price of bitcoin increases, so is the interest. That is a significant performance that even the U.S. Dollar has never experienced before. The constantly growing bitcoin price and appeal make it seem more valuable than the U.S. dollar, especially for investors.

Based on bitcoin's rapid surge, some investors are wary that it could soon edge out the U.S. dollar from being the world's reserve currency. That is because bitcoin's high price and interest portray it as a more valuable store of wealth. As a result, many investors are likely to shift to bitcoin holdings as a better hedge against the vulnerabilities of the global financial markets and economies.

Bitcoin transactions

The adoption of bitcoin into mainstream institutions is moving so fast and, we expect it to take over a wide range of financial transactions. Many people worldwide are currently using bitcoin to trade in stock markets, acquire investments and buy goods and services. Bitcoin can fulfill the same purposes as the U.S. dollar since governments now recognize it as means of exchange.

Unlike the U.S. dollar transactions that require intermediaries, bitcoin transactions wholly rely on blockchain technology. Bitcoin operates on entirely digitized networks, which play a crucial role in reducing transaction costs and speeding up money transfers. Bitcoin users only have to pay the standard transfer fees, contributing to lower transaction costs. On the other hand, using the U.S. dollar bears huge transaction costs resulting from account maintenance fees, withdrawal charges, etc.

The lower costs associated with bitcoin usage make it seem more efficient and convenient in financial transactions. That would allow investors to cut operational costs, maximizing profits. Although the U.S. dollar also supports electronic money transfers, it usually comes with huge expenses that leave users with a more significant financial burden. As a result, many people, including investors and consumers, are likely to choose bitcoin over the U.S. dollar.

Bitcoin's decentralization

Bitcoin is a decentralized financial instrument not tied to any authority or government. The U.S. Federal Reserve and government, on the other hand, regulates the U.S. dollar. As a decentralized currency, bitcoin offers users greater freedom to spend and manage their money worldwide. The U.S. Dollar does not have such liberties as its usage is subject to government regulations.

Many people view the U.S. dollar as a more restrictive financial instrument since the U.S. government entirely regulates how and where people can use it. That usually hinders people, especially from developing nations and countries that do not trade with the U.S., from accessing capital and investing.

The decentralization of bitcoin makes it much easier for people to access money anywhere in the world at their convenience. Besides, users only need a bitcoin app and internet connection to transfer money, trade and acquire investments worldwide. A platform like bitcoin profit makes trading Bitcoin easier.

Overall, bitcoin is now the most competitive cryptocurrency against the U.S. Dollar. However, it would take time to fully unearth bitcoin's potential threats to the U.S. dollar since it's in the early stages of achieving mainstream integration.

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