The global financial crisis and its European counterpart, the Eurozone crisis, highlighted the importance of currency diversification. Moreover, the recent recession has made many worldwide wary of traditional currency systems and looking for alternatives. The best aspects of a cryptocurrency trading platform, like trading tools, liquidity, and customer service, are available on a website. If you are planning to trade Bitcoin, you may register today on a reliable trading platform.
Unlike fiat currency institutions – banks that produce currency based on demand with no backing – bitcoins work on an algorithm that adjusts their supply based on their popularity – this helps to limit deflation. Furthermore, the deflationary nature of bitcoins helps to maintain price stability in an age where the value of fiat currencies fluctuates wildly; when price stability is achieved for fiat currencies, like for the EUR/USD pair recently, trade and confidence increase, fueling overall economic growth.
Technological changes also affect how we conduct commerce and finance every day. For example, cloud computing, which dramatically accelerates the speed at which a transaction can be completed and improves user experience, has enhanced how we conduct business. In addition, smartphones and computers continue to get smaller and less expensive, allowing individuals to carry around devices that constantly connect to the internet.
While these technologies have made business more efficient, they have also made it more mobile. It is advantageous for many reasons – it allows companies to grow globally faster and easily reach new markets. Bitcoin has been through a rollercoaster ride over the last few years – first valued at less than $1 in 2011, it rose to over $1,000 in late 2013, and it grew to $65000 in 2021. Let’s explore how bitcoin can become a viable currency. In short, bitcoin cannot become the alternative to fiat, but it is ranked as a currency for the following reasons.
1. The local currency in the digital age
With the rise of online retailers, global brands have the potential to reach into markets with virtually no economic barriers. The critical thing to note here is that eCommerce has caused a decrease in demand for traditional retail stores, struggling due to high rent and increased competition.
To survive and compete globally, traditional retail stores must allow their customers to pay with bitcoin or other cryptocurrencies. In a world where companies can grow globally with little geographic restriction and sell their products to millions of customers, the need for bitcoin has never been higher – people could even argue that businesses will thrive over the next few years because of this new trend.
2. Currency acceptance over the next few years
The daily transactions involving bitcoin have grown significantly over the last few years. It is mainly due to its value increasing significantly and more people using it as an alternative currency. However, in August 2015, BTC China, the world’s largest bitcoin exchange by volume, announced that it was closing its doors due to China’s crackdown on cryptocurrency exchanges.
Despite this, the volume in yuan-denominated bitcoin trading increased after China banned exchanges in September. Western Union is the world’s most remittance-trafficked company. It has partnered with Ripple to explore cross-border settlement using blockchain technology – Ripple plans to use XRP for settlement between banks, which could be an essential step for cryptocurrency mass adoption.
3. A reliable medium of exchange
One interesting aspect of trading in bitcoin is that it is one of the first digital currencies to be used as a medium of exchange. While this has not been widely accepted over the last few years, many vendors now accept bitcoin as payment. Therefore, it is expected that more businesses will take cryptocurrency.
4. Bitcoin as payment for international goods
In the future, it is expected that more goods will be purchased by users online from overseas vendors. The success of Amazon and eBay has created a demand for online retail, but it has also shown to be very challenging.
Many have had to cancel orders due to extended shipping times and other issues resulting in much inconvenience. However, promising blockchain startups are working on solutions that make the transaction process faster and easier so customers don’t have long wait times or worry about their packages getting lost in transit; it could even be said that this is one of the biggest challenges facing eCommerce today.
But why can Bitcoin not become an alternative to fiat currencies?
1. Instability:
Cryptocurrency, while gaining a lot of popularity worldwide, is still volatile. For example, the value of bitcoin has risen steadily since 2011 and fell in 2014 after the collapse of Mt. Gox, which was once the world’s largest bitcoin exchange.
Volatility is a significant reason why most governments and financial institutions have discouraged people from using cryptocurrencies like bitcoins and Ethereum as payment methods. For example, China has declared ICOs (initial coin offerings) illegal, and Russia has asked that trading in cryptocurrencies be banned altogether.
2. Bitcoin is hard to regulate:
Cryptocurrency is decentralized, and it’s difficult for any entity to regulate. The transactions made with cryptocurrencies are untraceable. It makes them susceptible to money laundering, terrorism, and tax evasion. The governments of various countries have been trying hard to control the circulation of bitcoins in the market, but things have gone differently than planned.
3. Bitcoin is not widely accepted:
The value of bitcoin depends on many factors, making it very volatile, and leading many people to believe that it will crash entirely at some point in the future. On the other hand, people hold bitcoins because they expect their value to rise over time.
