Bitcoin: The Inevitable Path Toward Global Adoption Of The Next World Reserve Currency
A changing of the guard is standard for fiat currencies — but bitcoin is set to supplant them all.
Image Source: Bitrawr.
If the last 700 years are any indication, reserve currencies have a shelf life of roughly 100 years. The U.S. dollar (USD) officially became the world reserve currency 77 years ago (Bretton Woods, 1944). Arguably, USD was the reserve as far back as the late 1920s.
Source: “Will a Digital Gold Rush Save America’s Economy?” Cryptokek Blog.
From a historical timeline perspective, the USD is in the twilight of its reserve status. Couple that with the fact that the United States is also expanding the money supply exponentially (devaluing the purchasing power of the existing supply of USD in the process), and to put it politely, this growth rate is unsustainable.
For the record, the U.S. Federal Reserve is not operating in isolation. Most major central banks across the globe are following this trend. Examples include the European Central Bank (ECB), the Bank of Japan (POJ) and the People’s Bank of China (PBOC) to name a few. Frankly, the majority of major central banks are racing one another to see who can debase their currencies the quickest.
Source: Haver Analytics.
Stanley Druckenmiller, who is considered a legendary investor in part due to his study of history and macroeconomics, thinks the USD will lose reserve currency status within 15 years.
“I can’t find any period in history where monetary and fiscal policy were this out of step with economic circumstances, not one.” — Stanley Druckenmiller
So, if the USD has a shelf life partially due to historical precedence and partially due to fiscal irresponsibility (overprinting of the money supply), what comes next? What replaces the USD? Another fiat currency? It’s possible, but my guess is the days of trusting a centralized party to maintain a stable supply of a currency have come and gone. Why trust, when you can just verify? An argument could be made that gold is today’s reserve asset as it is held by the majority of central banks.
For me, gold is the past, while Bitcoin is the future. Bitcoin is decentralized, easily verifiable, immutable, divisible with a known supply and is easily amalgamated into an ever-increasing digitizing global economy.
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