Over the past ten years, Bitcoin has ventured from the depths of obscurity to the dubious status of “nerd money” before becoming something else entirely. Once used only for dark web purchases, test transactions, and games like Satoshi dice, the currency has taken the world by storm and now trades over $5 billion worth every day.
That’s €4.4 billion, almost £4 billion pounds, or around 17.4 million BTC. There are a number of ways to express the value, but for an international audience of readers it’s usually the done thing to list a value in USD – that’s because the USD is currently the global reserve currency.
USD as a Global Reserve
The US dollar has reigned supreme for only a very short time, about 80 years. Before that it was the British pound sterling, and the French franc, the Florentine floren, and a number of others throughout the ages.
A global reserve currency is simply the currency held in the greatest quantities by the majority of world governments and institutions in addition to their local currency. The USD is recognized as a valuable and relatively stable currency by fiat standards with an inflation rate of around 2.25% per year.
As a result, when the value of a transaction or item is being discussed in an international forum, the USD is often viewed as a kind of “default” currency of conversion.
Crypto Prices in USD
An often-cited issue in crypto’s war of independence with fiat is that the prices are very commonly referred to in USD terms as opposed to their crypto value. Crypto is volatile, and it’s not really at a stage where it’s viable or practical to list the values in cryptocurrency only because the value changes so often.
A caveat to this, of course, is the habit crypto traders have of measuring their gains in satoshis (the smallest possible unit of Bitcoin) as opposed to USD or other fiat currencies. Although crypto traders are often among the least evangelical crypto supporters and many of them are in it strictly for the fiat gains, they find it worthwhile to count satoshis instead of cents because the entire crypto market is dictated by the price market of the ever-dominant Bitcoin.
At least in the crypto markets, then, Bitcoin reigns supreme. But can Bitcoin ever achieve such a feat in the wider world? Could Bitcoin one day overtake the USD or potential fiat successor as the global reserve currency?
This is no small task, and of course many (perhaps most) believe that it’s not possible, while maximalists see it as the only possible outcome of Bitcoin’s evolution. Let’s take a look at the various factors setting Bitcoin apart from the USD.
Bitcoin as the Global Reserve Currency
Bitcoin’s main strength here is also its weakness in this regard – it doesn’t have a nation. No nation, no creator, no political agenda. It just is.
While in the short-term, such a feature causes international authorities to balk at the project. Unlike the governments behind the dominant fiat currencies of the world markets, Bitcoin cannot be bargained with, negotiated with, reasoned with.
You can’t strike a trade deal with Bitcoin or discuss adjusting the supply and controlling the rate of inflation. Bitcoin’s value will be dictated by market players and its supply will run out in around 100 years, and that’s it.
This makes global economic control somewhat difficult, but of course, that is exactly the appeal of Bitcoin as well, and even among state governments there must be those to whom the idea of a global reserve currency that doesn’t inherently tip the balance of power to any one nation seems promising.
For Bitcoin to ever be considered as a global reserve, the price must stabilize or at least appreciate in a more predictable manner. How or if that may be achieved is as of yet unclear, but with more and more interest and money flowing into the cryptocurrency it certainly seems possible.
From there, the more governments trading in Bitcoin, the better. Governments, mainstream financial institutions, average citizens. Access to Bitcoin isn’t as restricted to international citizens as USD is in some countries. The transaction fees are lower, the transactions are faster, and adoption is spreading.
Technically, the answer to the question of how BTC could become the global reserve currency is that the process has already begun… but what the ultimate outcome of that journey will be is yet to be seen, and will unfold over the course of several years or even decades.
One way or another.
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