The dollar is ever stronger

The global financial crisis has permanently altered the face of finance. When the global financial crisis hit in 2008, many financial institutions, including banks and credit card issuers, were hurt. But even though many banks are still reeling from the impact of the crisis, it's unknown how much longer they'll be able to operate normally. Unfortunately, the global financial turmoil has also proven to be a blessing in disguise for products like debt bonds and Bitcoin. While it was previously thought that these two digital currencies would never take off as a medium of exchange, both have grown steadily throughout this past year, and their increasing use as an alternative to traditional money poses a growing threat to central bank control over these currencies. In this article, we discuss the risks posed by introducing Bitcoin and other digital currencies into everyday life, their potential benefits for institutional investors and industry players, and how governments worldwide are working to understand their use cases.

What is Bitcoin?

The all-new Bitcoin is a decentralized digital currency that uses online technology to store data and execute transactions. It is not intended as an actual physical object but as an electronic digital currency that uses algorithms to secure transactions. The blockchain, the consensus mechanism behind the network, provides an architecture that enables users to record and verify transactions without any central authority having control over the data. But Bitcoin is not an ideal currency to use because of the complexity of using the wallet for the general public and the unstable price, which prevents users from spending rather than holding.

How Does Bitcoin Work?

One of the most critical roles that banks and financial institutions play is to issue money and conduct business through bitcoin-based payment systems. As of now, only a select group of banks and financial institutions in the United States and Europe accept bitcoin as an option for payments. Although there is no central bank for Bitcoin, whales are influencing the market, which is volatile. In addition, using Bitcoin is prone to scams because there are more scamming online that are likely to bait users into transferring their Bitcoin without the possibility to reverse the transactions.

Benefits of Bitcoin as an Alternative to Money?

At its core, money is a transaction between people. It's the act of adding money to another account or the flow of money from one account to another. In the case of the financial crisis, the adoption of Bitcoin changed the landscape. As the first digital currency to gain widespread popularity, it has been used to replace cash as the medium of exchange. Now, more than ever, people need access to digital payment options like debit cards, credit cards, and other cash-based payment systems. However, cryptocurrency usage can increase when the dollar is more robust due to cheaper transactions and lower prices.

Strong Dollar Environment

If you live in a country with the dollar as your fiat currency, you are the lucky dog! The strong dollar will deleverage the debt faster and shorter the maturity of debt. Moreover, since all assets hedge dollar, the stronger the dollar has, the lower the asset valuation.

Risks of the Introduction of Bitcoin and Other Digital Currencies into Everyday Life

Beyond the obvious threat of being banned by every central bank in the world as well as the increased risk of identity theft and other security issues as a result of digital payments, it is also important to note that the introduction of new technologies and industries poses new challenges that need to be addressed by both business and government. Some of these challenges include creating an ecosystem that can support both new technologies and old ideals, maintaining the necessary level of technology infrastructure to support both new technologies as well as existing ideas, and making sure those new technologies are used in a meaningful way.

How does a business case for regulating and controlling digital currencies look like?

It’s important to remember that this is an emerging industry that, until now, has been treated as off-the-shelf technology. Therefore, regulatory bodies need to understand how it works, its main ideas, and its main risks so they can determine whether or not to regulate or regulate appropriately. Regulators need to protect users through regulations but without interfering with the crypto's growth technology.

Conclusion

The global financial crisis will change the landscape of asset valuation, and investors will have to re-evaluate their strategy. Likewise, the institutions will have to change their old way of doing business and adapt to the new ideas of the future asset class. Otherwise, each crisis will likely screen out the weaker assets and make people suffer from the loss. It is also an opportunity to see how Crypto can weather through the financial uncertainty into the future and eventually become a leading financial asset through the upcoming digital revolution.

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Photo by Shubham Dhage on Unsplash

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