Morgan Stanley’s global strategists have proven that Bitcoin is making progress in replacing the U.S. dollar as the world’s reserve currency. He warned governments: “Don’t think that traditional currencies are the only store of value or exchange that people will always trust.”
Bitcoin is becoming the world’s reserve currency
Ruchir Sharma, chief global strategist and head of emerging markets at Morgan Stanley Investment Management, published an opinion article in the Financial Times on Wednesday. He explained how Bitcoin has made progress in replacing the U.S. dollar and becoming the world’s reserve currency.
The Indian investor first recalled that when the coronavirus pandemic, the U.S. dollar was the world’s “reserve currency” and pointed out that the U.S. dollar has become a 100-year history, while other previous reserve currencies lasted an average of about 94 years. Sharma said: “That was originally to question the reason for how long it can continue, but there is a warning: lack of successors.” He pointed out that some competitors lack competition, such as the euro or the yuan.
The strategist continued: “U.S. officials are therefore confident that in response to the Covid-19 lock-in measures, they can print an unlimited amount of U.S. dollars without compromising its reserve currency status, thus enabling the country to maintain a huge deficit without There will be obvious consequences.”:
However, a new class of competitors is emerging: cryptocurrencies…cryptocurrencies such as Bitcoin are promoted by their advocates as decentralized, democratic alternatives.
Sharma pointed out that although some people are skeptical of Bitcoin, including those who prefer gold, because of fear that “the central bank led by the Federal Reserve will devalue its currency,” many people have bought Bitcoin in large quantities. “This has pushed up the price of Bitcoin.” Since March, the price of Bitcoin has tripled, becoming one of the hottest investments in 2020. “
According to the International Monetary Fund (IMF), he went on to describe that after decades of climbing, the United States’ debt to the rest of the world last year exceeded 50% of its economic output. The reason is that It is “the threshold that usually heralds an upcoming crisis” (International Monetary Fund). Sharma added that since then, as the government continues to borrow heavily under the blockade, these debts have soared to 67% of output.
“When the rest of the world begins to lose confidence that the United States can continue to pay its bills, the dollar’s rule may end. Strategists claim that this is how the currency fell in the past.
Bitcoin is also beginning to make progress in its ambition to replace the U.S. dollar as a medium of exchange… Even if the pandemic passes, currency printing may continue. Believe it or not, the growing distrust of traditional alternatives will benefit Bitcoin.
Sharma believes that Bitcoin is gaining mainstream acceptance. He pointed out: “Today, most bitcoins are held as investments, not to pay bills, but this situation is changing.” He pointed out that small businesses are beginning to use this cryptocurrency for international trade. Especially in countries where the dollar is difficult to cash. (E.g. Nigeria) or unstable local currency (Argentina). He further pointed out that big companies such as Paypal and its subsidiary Venmo plan to allow 28 million merchants to accept Bitcoin next year.
Sharma then warned governments: “Bitcoin’s surge may still prove to be a bubble, but even if it bursts, this year’s enthusiasm for cryptocurrencies should warn government currency printers around the world,” he elaborated:
Don’t assume that your traditional currency is the only store of value or exchange that people will always trust. Tech-savvy people will not stop looking for alternative products until they find or invent alternative products.
The strategist concluded: “And, as some governments are already considering, regulating the prosperity of digital currencies may only intensify this populist rebellion.”
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