Global strategist Morgan Stanley has put forward a case that bitcoin is making progress toward replacing the US dollar as the world’s reserve currency. “Do not assume that your traditional currency is the only stores of value, or exchange media, that people will ever trust,” governments warned.
Bitcoin is on its way to becoming the world’s reserve currency
Morgan Stanley Investment Management’s chief global strategist and head of emerging markets, Ruchir Sharma, published an opinion piece in the Financial Times on Wednesday. He explained how bitcoin is making progress toward replacing the US dollar and becoming the world’s reserve currency.
The Indian investor began by remembering that when the coronavirus pandemic struck, the US dollar was “world reserve,” noting that it had been one for 100 years while another previous currency lasted about 94 years on average. “That would have been a reason to question how much longer it could last, but to one caveat: the lack of a successor,” Sharma described, citing some failing competitors, such as the euro or China’s renminbi.
“US officials were therefore confident that, in response to Covid-19 locks, they could print the dollar in unlimited amounts without undermining its reserve status, allowing the country to continue to run major deficits without apparent consequences, ”the strategist continued, adding:
But a new class of competitors is emerging: cryptocurrencies … cryptocurrencies like bitcoin are set by their promoters as decentralized, democratic alternatives.
Pointing out that bitcoin skeptics, including those who prefer gold, Sharma said, “many people have bought bitcoin in bulk,” as they fear that “central banks are led by a Fund US Federal ruin the value of their currency. ” This has boosted the price of bitcoin which “has more than tripled since March, making it one of the hottest investments in 2020.”
He went on to describe that after decades of rising, US debt to the rest of the world exceeded 50% of its economic output last year, noting that this is “a threshold that often signals a crisis to be come, ”according to the International Monetary Fund (IMF). Sharma added that since then, those obligations have pocketed to 67% of output as the government continues to borrow heavily under lock and key.
“The dollar’s reign is likely to end when the rest of the world begins to lose confidence that the United States can still pay its bills. That’s how currency fell in the past, ”the strategist claimed, asserting:
Bitcoin is also beginning to make progress on its ambition to replace the dollar as a medium of exchange … Currency printing is likely to continue, even when the pandemic passes. Trust it or not, bitcoin will benefit from expanding distrust in the traditional alternatives.
Sharma believes bitcoin is accepted in the mainstream. “Today, most bitcoins are held as an investment, not used to pay bills, but that is changing,” he said, noting that small businesses are starting to use the cryptocurrency for international trade, ” especially in countries where dollars can be hard to come by (like Nigeria) or the local currency is unstable (Argentina). “He further highlighted the fact that big companies like Paypal and its subsidiary Venmo are planning to allow 28 million traders to receive bitcoin next year.
Sharma then warned governments “Bitcoin’s surge may still bubble, but even if it does pop up, this year’s rush to cryptocurrencies should be a warning to government money printers everywhere, especially in the US,” expanding:
Do not assume that your traditional currency is the only stores of value, or exchange media, that people will ever trust. Technically-savvy people are not likely to stop looking for alternatives, until they find or invent one.
The strategist concluded, “And stepping in to regulate the digital currency boom, as some governments are already considering, may only accelerate this popular uprising.”
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