Cryptocurrency shows immense promise in dominating the global economy. Despite the challenges such as limited bandwidth or the general public's inherent hesitation to adopt a new way to transact, there's always potential in Bitcoin and other types of cryptocurrency.
Over a decade ago, economic visionaries predicted that the day would come when the internet could revolutionize monetary transactions. But despite the potential, the mere fact that Bitcoin does not pass through or can be controlled by banking institutions make it all the more difficult to become mainstream.
Is there a possibility of an economy dominated by Bitcoin?
There are many reasons why Bitcoin isn't likely to dominate the global economy just yet. For starters, since banks don't regulate cryptocurrency, it's more volatile and susceptible to risks such as recessions.
However, it's quite surprising that the current situation brought about by the COVID 19 pandemic seems to be the catalyst in pushing Bitcoin as an accepted currency or at least a reserve.
Let's take a closer look at some of the reasons for this occurrence
The pandemic is giving Bitcoin a fighting chance against well-established currencies
If you set Bitcoin against the dollar or UK pound sterling, it's natural to assume that the two established currencies are stronger, but no currency is immune to the vulnerability of the economy. In the recent collapse of the Venezuelan economy, many people turned to cryptocurrency as a more viable way to transact.
Going back to the 2008 economic crisis, banks were partly to blame because of their tendency to lower interest rates by printing more money, hence resulting in a debt bubble. Despite these occurrences, banks haven't abandoned such strategies and continue to cause over inflation.
How does the COVID 19 pandemic fit into the big picture?
The most significant impact of the pandemic is a decrease in both demand and supply. Global trade has seen major setbacks, especially in some of the most vulnerable sectors. As a response, economists employed plans to ease the effect on the economy. One such move is reducing interest rates, which of course, will lower the value of most currencies. In contrast, Bitcoin isn't susceptible to any move done by banking institutions, making it more resilient.
The current economic condition may eventually cause the acceptance of radical financial ideas, including the widespread use of cryptocurrency.
Is the decentralization of Bitcoin an advantage or a disadvantage?
The decentralized nature of cryptocurrency has always been considered as a disadvantage.
The idea itself seems to connote disarray or unreliability. But with the current scenario where the lowering of interest rates threaten to cause deflation, the decentralization of Bitcoin may indeed become an advantage. How? Simply because we see a steady increase in our dependence on the internet. And it's only natural to trust Bitcoin, which is inherently linked to the world wide web.
Similar to many innovations linked to the internet, such as email communication and cloud computing, cryptocurrency is predicted to increase with the same trajectory. Now more than ever, when online transactions are the only safe means to retard the pandemic's effects.
The concrete role of Bitcoin in the economy
Bitcoin plays an essential role, not only as a new currency but as a trusted method of paying for online transactions. Over time, the user experience and interface have also improved – and more people are starting to understand and embrace the concept.
The stability of digital currency also makes it ideal for developing applications. Many view Bitcoin and other types of cryptocurrency as a highly operable and viable solution to offering users an easier means to transact online.
The future of Bitcoin
The COVID 19 pandemic is indeed an unusual occurrence that provided Bitcoin with the push it needed to level with well-established currencies.
Though it may still take time before digital currency becomes mainstream, the prevalence of online transactions because of the current circumstances will lead to an increase in the adoption of alternative ways to pay.
The decentralization of Bitcoin may, at one point, be a disadvantage – but is also one of its strongest features. Having the option to use a currency that doesn't get manipulated by banks is always a good option, especially when considering the investment potential and viability of such currency amid economic uncertainties and global financial downturns.
