There were predictions that bitcoin might collapse but none of such predictions have proved to be true. Despite the ups and downs, bitcoin can now be considered a semi-permanent feature of the world’s financial landscape. However, bitcoin is still not a generally accepted currency. Even though many retailers have started accepting bitcoin as a payment method, most of the businesses and everyday payments are still being done in regular old fiat money. It is important to note that the dollar price of Bitcoin is still being used to calculate bitcoin’s value as a speculative asset, instead of bitcoin’s usefulness as a payment method or a medium of exchange.
It’s easy to understand why it is so. Because of the volatility in bitcoin’s price, most people don’t want to hold onto it for too long. Many economists have started thinking about how the current situation might change. Bitcoin might actually become the standard means of payment and replace fiat money in the near future. This will have huge implications, because if bitcoin does become real money, the crypto market will be interfering with central banks’ power to manage the price level and the economy. We shall now look at why cryptocurrencies like bitcoin are becoming so popular and why fiat money might be replaced.
What do cryptocurrencies offer?
Investors and traders have already made a killing because of bitcoin. The volatility of the bitcoin gives traders a lot of opportunities to trade profitably as the price goes up and falls down. Introduction of auto trading robots and software’s have made it even easier. These “trading bots” will execute trades for their users automatically whenever it is the right time to buy and sell bitcoin. They will take market conditions into account in order to trade accurately, or make profits for their owners. One such completely free trading bot is Bitcoin Supreme. You can read more about this here: https://bitcoinsupreme.net/. The crypto market has been attracting a lot of people and huge businesses are keeping their eyes on it.
Cryptocurrencies come with a lot of benefits and not only for the investors and traders in the crypto market but the general public as well. For instance, when buying real estate there may be some third party involved such as a lawyer. Payment of third party fee and any delays can be avoided if bitcoin is an accepted payment method. It could also be a method of payment that is recognized by all countries as bitcoin is not tied to transaction fees, exchange rates, or other fees of any country. Bitcoin can be used internationally, making transactions easy and simple. Also, there is normally no requirement of a transaction fee for exchanging cryptocurrencies.
Bitcoin will also be accessible for most people as there are more than 2.2 billion people with internet and mobile phones. Bitcoin can also prevent identity theft. When you give someone your credit card, even when the transaction is for a small amount you still give them access to the full credit limit. For bitcoin, a “push” mechanism will allow the holder to send exactly what they have to pay the recipient without any further information.
Bitcoin transactions are recorded on a global network of computers using blockchain technology. What this means is that bitcoin is managed by its network instead of a central authority. The network operates on a user-to-user or a peer-to-peer basis and that is what decentralization means.
Bitcoin might replace cash.
Many economists believe that if there is soon a regulatory framework in place in key regions of the world. There are a few government-backed moves in place that are going towards cashless societies. China has a huge market and is planning to introduce a “blockchain” version of their currency yuan. Cryptocurrencies like bitcoin certainly have the potential to replace cash by 2030.
However, there are three hurdles that must be overcome before bitcoin/cryptocurrencies can replace cash. Acquiring legitimacy in the eyes of important authorities like the governments of different countries. A very strong digital financial system that can stop cyber-attacks or any other potential risk for a purely digital payment market. Making alliances with the bigger payment industries.
The idea of cryptocurrencies like bitcoin will challenge the monopoly of the central banks. As the central banks feel threatened by the possibility of cryptocurrencies replacing fiat currency, they are also looking at the idea of providing a digital currency issued by them. If this happens, nothing will prevent cash from being replaced. This will definitely take some time but people can start preparing themselves for this change.