Crypto currency is a new age digital asset or a virtual currency secured by cryptography. It is based on a network distributed across many computers. Since the network decentralizes it, it allows them to remain outside the purview of the government authorities.
Types Of Crypto Currency
The first blockchain-based cryptocurrency was Bitcoin, launched in 2009. It is the most popular and valuable still. Some other competing cryptocurrencies known as Altcoins include Litecoin, Peercoin, Cardano, and EOS. Blockchain technology keeps an online record or ledger of all the transactions conducted.
Advantages Of Crypto Currencies
Crypto currencies make it easier to transfer funds between two parties without a bank or a credit card firm. The transfer is carried out at a minimum processing fee. Many experts see potential in using cryptocurrency to lower transaction costs by streamlining the payment processes.
Disadvantages Of Crypto Currencies
Since these are virtual currencies and there is no influence of the central bank, it can wipe out the digital balance by losing data if a backup copy of your private key is not available. There is no government authority to protect your interest, and also that makes it more vulnerable to be used in illegal activities like tax evasion or money laundering.
Bitcoin Versus The US Dollar
A dollar collapse is when the value of the US dollar crashes or plunges. In that scenario, people holding dollars will sell them at any cost. It hits not just individual investors but also foreign exchange traders and foreign governments. It results in a heavy demand to sell the dollar without any purchasers available in the market.
What Could Lead To A Dollar Collapse?
The significant issues that might result in a dollar price collapse are the underline weakness in the value of the US dollar and the availability of other suitable alternatives. If we talk about the US economy’s underlying flaws, it is still the strongest in the world. The dollar is a global currency and used for almost 50% of all cross-border transactions. Thus it requires the central banks to hold dollars in their reserves.
Secondly, there is no viable currency alternative to purchase as of date. The next popular currency is the Euro or the Yuan. But still, they comprise only 21% and 2% of foreign currency reserves, respectively. The Bitcoin value is still quite volatile, and there are no government regulations that make the currency vulnerable to be used for illegal purposes.
What could lead to a collapse of the US dollar is possible only if the countries dump their holdings of treasury notes, leading to a panic situation. All major economies are dependent on the US for trade. Major countries like China and Japan are aware of the problem that if they sell their dollars, their action will lower the dollar’s value but, on the other hand, would also harm their exports.
A sudden dollar collapse would create global havoc. Investors would rush to sell the dollars and purchase currencies like Euro or gold and other currencies.
US exports will be very cheap, and import prices would rise, leading to significant inflation. Interest rates would rise, and business growth would be at the lowest.
The Future Of Crypto Currencies
Bitcoin and other cryptocurrencies are very different from FIAT-based economies and cannot be influenced by any external forces. They are completely decentralized and based on the free-market economy. It is known for providing economic freedom and voluntary exchange, so there cannot be any ceiling to these currencies’ prices. As compared to any investment asset, Bitcoin is providing far more returns in the long term with the target price of $10 million by 2030.
Yes, there may be uncertainties involved in its price movement, but its economy is expected to keep the prices skyrocketed.
What Will Happen To Bitcoin If The Dollar Collapses?
If the US dollar crashes, then Bitcoin ideally will go up in value since Bitcoin is a global asset, so that you can sell it for any other currency. If the dollar starts to drop in price, this will result in Bitcoin raising the cost versus the US dollar. It would act as a great equalizer for currencies around the world. You can say that devaluation of the dollar can act as a suitable catalyst for cryptocurrencies in general.
As of now, whenever the dollar price is falling, the FED keeps printing and infusing money in the economy. Sooner or later, people would realize that cryptocurrencies will give them more security in the long run. For example, Bitcoin is limited to 21 million coins, which will cause the value to rise.
Not Putting All Eggs In One Basket
We have always believed that the USD is invincible and that the US is one of the strongest economies. Every country has invested in the US dollar, but the question is that, can the dollar maintain its status in a depression, a global slowdown, a war, or a pandemic?
So we must be prepared for emergencies or for when the dollar loses its value. Cryptocurrencies seem to be one of the options to diversify your investment basket. Its liquidity in the traditional trade market is not possible as it is just a virtual currency; however, if people move to this form of money, its scope expands. It allows you to move away from the dollar and store the value in other states.
It can be transported anywhere without any physical involvement just by mere keys that you possess, backed on a ledger, and transacted easily. So it will have a profound impact on the economy in the future.
The fall of the dollar might be a perfect storm for cryptocurrencies to reach a great height. The dollar has fallen to its lowest level in over two years, while gold, silver, and Bitcoin continue to shine. There seems to be a massive push towards virtual currency and the digital finance space with the current macro backdrop.