Can cryptocurrency actually replace fiat anytime in the future?

Over the course of the last few decades, there had been many tries of finding an effective alternative to fiat currency. However, none of the proposed ideas carried practical implications, and thus, there were no as such developments in this field. It was not until 2009, that the global community came across the idea of cryptocurrency in the form of Bitcoin. The term digital currency was around for a while, but cryptocurrency came as a rather influential extension of the generic idea. Since then, it has been a rollercoaster for the crypto realm, but it is safe to say that it has emerged as a strong force in recent times.

The emergence and then success of crypto was majorly driven by the failing ecosystem of fiat currencies and traditional banking systems. The faulty concept and policies of banks are usually not user-friendly. It is highly complicated and requires a lot of documentation for as little as opening just a bank account. Furthermore, conventional banks are controlled and regulated by government authorities, which possess a right of ruling over the accounts of the consumers. This comprises the sanctity and privacy of the users who are always just a step away from losing all their possessions. Governments track the flow of cash from these accounts and at times, hold the account for an indefinite period of time.

The increasing relevance of crypto

For all the above mentioned reasons, it was expected that crypto will attract users from all over the world. However, crypto has much more to it than only being a source of transaction and payments. It is widely used as a trading and investing commodity. There are tonnes of cryptocurrencies, including the likes of Bitcoin and Ethereum that are traded at several crypto exchanges all around the world. Traders and investors acquire the services of platforms, like the Bitiq app, which assist traders through their trading careers. They provide credible and more beneficial trading signals to help users gain more profits.

These features of crypto have made it more relevant to the business sector. Many forms and organizations now accept payments in Bitcoin and other cryptocurrencies. They either liquefy their assets to fiat, in order to prevent the impact of market volatility, or they store their digital assets in e-wallets for investing purposes. Thus, organizations are able to take a chance to attain more profits, obviously with an element of significant risks.

The take of Governments on the use of crypto

To replace fiat, crypto has to be inclusive of every decisive element in the game. Even though many businesses are finding a comfortable ground with the new concept, there is still a hindrance from the regional governments over the increasing use of cryptocurrencies. As crypto limits the control of regulatory authorities, they have not developed a liking to its anonymity. Many countries like China have tried to control crypto-related activities in the country. Also, many developing countries have cited the risks of money laundering and terrorist financing to limit the public use of crypto. However, it has not significantly stopped the worldwide use of various digital currencies.

Just recently, El Salvador became the first-ever country to legalize the use of Bitcoin through the country’s legislature. The step was taken in a bid to cut the cost of sending remittances in El Salvador from the foreign world. This initiative carries immense significance for the relatively new concept, as it appears to have the potential of replacing fiat. However, many experts and analysts are still unsure of this and argue that even though crypto, mainly Bitcoin, is being widely used and adopted, it is still too volatile and unstable to replace the dollar.

Bitcoin has experienced highly fluctuating prices in recent times. Just this year, Bitcoin reached an all-time high of over $64,000 but it currently stands at $32,000. This shows that it carries a significant amount of risks for countries to dwell upon. This is why many experts predict that Bitcoin can be a part of the mix in the usage at a wide level. It can be used along with the traditional fiat currencies to some extent. Crypto is too volatile and responsive to tweets, rumors, and general announcements. Thus, it cannot directly compete with Dollar yet. Moreover, the market capitalization of the crypto market is by no means able to compete with the market capitalization of the 15 recognized fiat currencies.

Another argument against Bitcoin and several other cryptocurrencies is that its mining is getting too difficult and carries severe environmental implications. This claim is quite true but crypto geeks also argue that traditional gold and oil mining is far more hazardous when compared to crypto. This is why the debates around the mass adoption of crypto and its replacing fiat are never-ending. Therefore, it will take time for the debate to settle, and for us to reach a final conclusion regarding the matter. The case of El Salvador and other countries planning to pursue Bitcoin at a national level can act as a test case for its future endeavors.