Bitcoin Vs US Dollar - A Story In The Making

Hi there! If you find me witing a lot about money and cryptocurrenies, just know that it is what is in my  mind most of the time. As someone who has grown into not talking a lot, I run plenty scenarios in my head before I speak. On Wednesday the 4th of December, 2024, the Federal Reserve (FED) chair said something that may have energised markets. When asked about his take on Bitcoin, he said 

       “People use Bitcoin as a speculative asset. It’s like gold—it’s just virtual and digital,”  

                                                                                                Jerome Powell.

                                                                      

Bitcoin has long been refered to as digital gold. Coming from one of the most important voices in finance and global markets, this comparison of bitcoin to gold requires looking deep into and that is why I kept thinking about it. I thought about it and it made sense given we have heard President-elect Donald Trump talk about the US establishing a strategic Bitcoin reserve. To fully grasp this, you have to understand that the US holds the highest amount of gold as reserve in the world and this also contributes among other factors to the US dollar as a reserve currency. In the digital space, holding a significant chunk of Bitcoin's 21 million finite supply will only enhance the dollar's position and dominance. This should be basic thinking if you actually think about it. There's a lot of skepticism about this and I will say it is out of fear for the unknown consequences in the traditional financial system. 

Visionaries are doers and one can already see how fast Bitcoin is being acquired by big institutions. This is a new tehnology and requires visionaries to envisage what is to come and act fast. After the finacial crisis of 2008, Satoshi Nakamoto (creator of Bitcoin) must have thought everything through before coming forth with Bitcoin. Yes! Bitcoin was created to correct the systemic errors of the financial system by giving power back to the individual when it comes to their money. What ever is to come promises to be a storm. If Trump pulls this Bitcoin reserve idea through, it will shake up the financial system and the world would never be the same again. Bitcoin is being treated as a commodity by major institutions and thus, many are buying it as an asset. You may have your doubts but think about it, it now trades at $100k a coin after almost two decades. When we conduct studies in science and look at data, we are usually looking for long term trends and two decades is long enough to have established that this thing called Bitcoin did not come just to cum lol. Joke aside, I mean BTC is here to stay.

Let me now present a case for while I agree with Powell and why Bitcoin seen as digital gold can boost the US dominance. I say US dominace and not US-dollar dominace because I don't clearly understand the dynamics of what Bitcoin's usablity in international trade will look like. Never forget that Bitcoin is also seen as a currency and not just an asset to be held on to. Relative to gold, bitcoin can be transacted easily and faster. So this is an area that the dollar can take some heat. Unlike a centralized/controlled dollar, Bitcoin is decentralised which could cause unseen friction in our traditional financial system. 

Overall, I think besides Bitcoin coming with its high volatility and requiring significant cyber security robustness to preserve, it stands to benefit the US dollar provided they own a significant or majority of it. This is because, it can serve for diversifying US financial assets and reduce reliance on the usual gold and foreign curreincies. If the US ends up dominating with Bitcoin holdings, they could benefit geoplitically against forign adversaries like China. All this would further enhance the dollar's status as the reserve currency. 

So, I believe at one point in the future, it will become a race to see who owns the highest amount of BTC in what I'm calling "The Great Bitcoin Rush". Hey! Bitcoin is still quoted in dollars.