(Newswire.net — November 9, 2020) — With the popularity of digital currency in the market and business world has raised many points and questions. One of such questions is about the replacement of dollars with cryptocurrency. In this article we are going to discuss the relation of cryptocurrency and dollar.
What makes digital currency a strong candidate for change?
Anything which can serve as a medium of exchange can be included in a group of currencies. Cryptocurrency or digital currency meets this criterion as many businesses are accepting cryptocurrency as medium of exchange of products or services. A lot of cryptocurrency trading platforms are serving well around the globe. Although digital currency is the youngest in the group, as it is available since 2009, however its rapid growth and worldwide acceptance is alarming for dollar.
Position of dollar
In the financial world, the dollar is a strong medium of exchange as it is widely used for trade and businesses around the globe. In many parts of the world currency values are determined with reference to the dollar. Although it suffers some value fluctuation from time to time because of inflation but it remains minor that no one notices it. The conventional payment methods are more feasible by using dollars as a medium of exchange.
Scalability and usability of fiat money is also favoring dollars. Regulations are also onboard for managing and regulating the entire system. These regulations may vary in different parts of the world but the main purpose behind them remains almost the same. The infrastructure is also similar that central banks are responsible for managing and keeping the entire system running.
Drawbacks of Cryptocurrency
Cryptocurrency is highly volatile in nature. It means there is no smoothness in change of its value. In the year 2017 it has observed a huge increase in its value which was almost 2000%. This is a good scenario for the stockholders but such intense variations in price of cryptocurrency reduce the chance of becoming a medium of exchange widely.
Another significant point is the store of value which can help to become a medium of exchange. But in case of digital currency long hold of value is lacking. People love digital currencies for their quick and huge rise in their value.
Digital currencies are unbelievable regarding store of value almost in the entire world. However, experts and financial analysts are discussing the hard fork changes in the basic rules and protocols of cryptocurrency to strengthen the store of value.
One more important point about cryptocurrency which needs to be addressed in units of account. This issue is still open for debate and different opinions and suggestions are available. According to famous financial analysts and economists, volatility of digital currency hinders its use as a unit of account. Because of volatile nature it cannot be used to enumerate the worth of other items and services.
Although digital currency is now accepted in businesses and trades, still it needs to consider the above stated points to improve for becoming a medium of exchange worldwide.
Conclusion
Digital currencies have potential to substitute the US dollar as it is rapidly growing and meeting the currency criteria. However, this is not going to happen very soon as cryptocurrencies have to address some key points which are weakening its case. Digital currency has started to perform as a medium of exchange in many parts of the world. And if it improves the store of value and unit of account, it is a very strong candidate to replace the US dollar around the globe. Analysts are hopeful about it and predict the next decade is important.