4 Reasons Why Bitcoin Will Not Be The World's Reserve Currency

in EspaVlog3 years ago

Bitcoin maximalists are convinced that Bitcoin is going to be the everything money. It will take over the world and very little will exist. Most of them are convinced that Bitcoin will usurp the USD as the world's reserve currency. Yesterday I wrote 5 Reasons why the USD will not lose its reserve status.

In this article we will cover the 4 reasons why Bitcoin will not be the world's reserve currency.

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1. Unit of Account

One of the main characteristics of money is that it serves as a unit of account. So I ask you, what is a Satoshi? Better yet, ask the average person, especially one who is not involved in cryptocurrency.

The US Dollar is an excellent unit of account because most understand what it is. We have 4 generations of people who were reared in that world. Anyone who deals with the United States, in terms of exporting, understands how much their products are worth in USD.

Trying to teach people a completely new system is no easy task. In fact, it is damn near impossible. The USD is ingrained in the minds of people and most will not give that up.

For this reason, it is not surprising to see stablecoins being tied to the USD. While some are literally backed by USD holdings, even the algorithmic coins like the Hive Backed Dollars (HBD) use the dollar as a unit of account.

2. Not Based Upon The Free Market

Bitcoin is not a free market coin. In fact, it is driven less by the market than the USD. With the latter, its creation is dependent upon the commercial banking system meaning lenders and borrowers have to agree to "print" more USD.

With Bitcoin, there is none of that. The emission rate is coded in. If that is not bad enough, money equilibrium is impossible. There is no way Bitcoin can be determined by the free market.

The cap on Bitcoin is 21 million (and whatever the associated Satoshis work out to be). Where did that come from? And more importantly, what is the free market requires 25 million Bitcoin? Were do we get that? The answer is you do not. Hence the economy will have to do without.

Of course, the flip side is true. What is 21 million is actually too much for the economy? How do you reduce liquidity? Once again, it cannot happen.

Bitcoin has no elasticity, one of the 3 functions of a reserve currency (liquidity, adjustment, and confidence).

Whatever is pre-determined is what Bitcoin operates upon.

3. Fixed Money Equals Tyranny

History is riddled with lessons about fixed money. The fact that supply is capped is advertised as a positive by Bitcoin supporters. However, when we understand what fixed money does, it only leads to more inequality and, ultimately, tyranny.

People do not seem to grasp who will be in control of Bitcoin going forward. Michael Saylor, a Wall Street guy (and not a very big one), is already in possession of 120K Bitcoin (whatever that equals in Satoshi). He already stated he is never selling. Why would he? He can always collateralize it.

What happens when the rest of the world figures out what Saylor knows and decides to do the same? We will see central banks, sovereign wealth funds, and major financial houses all piling in. If Bitcoin was the only game in town, what do you think is left over for the rest of the planet?

Talk about the rich getting richer. Even if we operate from a 5% return perspective, with a capped supply, the money will move into the hands of those who can afford to hold it. Since the wealthy do not require spending all their income, whatever is excess can attract, in this instance, more Satoshis. Who will that comes at the expense of? Those with very few Satoshis.

Now we truly get the golden rule. We know that with an elastic money supply, wealth and income inequality can result. At the same time, we see tyranny spreading throughout the world. People seem to think this will get better with a fixed monetary system.

4. Economy Killer

Money is a tool for collaboration. This is what enables our economies to expand. People are innovative, curious, and desiring ever more. Basically this requires money.

A fixed money supply means progress stops. There is little incentive to invest since, with fixed money, there eventually is no return to be had.

At the same time, wealth in the form of businesses and assets will plummet. People who think deflation is a good thing should look at Japan over the last 25 years. Or better yet, take a reading about the Great Depression. That was not an inflationary period in history. Tell us how that worked out.

What was the cause of that? One of the major problems was the money supply was contracted significantly. A lack of money when it was needed turned what was likely to been a severe recession into one of the worst economic periods in history.

Bitcoin would top that if it were the reserve currency.

Bitcoin's Benefits

There are two things that Bitcoin could be very good at.

The first is secure transactions. While the network is slow and clunky, it is very secure. If sending large sums of money, this is not a bad way to do it. Yes it is faster than the present settlement system now, but that will not always be the case. The FedNow system is implementing instant settlements in 2023 or 2024. Nevertheless, if sending a few million (or more) Bitcoin is not a bad way to go.

To me, the best use case for Bitcoin is as pristine collateral. Since it is liquid and transparent, this could be an agent that really provides the global financial system with what it is lacking. The ability, especially when tied to the USD value, for it to keep expanding as more collateral is needed exists. This could put the market cap at $20 trillion, if not higher.

We have hundreds of trillions in global debt and the only securities that banks take between themselves classified as pristine is US Treasuries. Bitcoin could really aid this market.


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the fight for the power of economic dominance between Cryptocurrencies (BTC) and the Dollar (USD) is just beginning, I think both will coexist for a long time and must learn to be in the same habitat, since each of them has its advantages and disadvantages .

Separate from comparing to bitcoin but just discussing the dollar in general it’s lost 99% of spending power in a century. It’s corrupt and since coming off Gold standard totally especially it’s just backed by violence. Fiat currency never works long term. I certainly prefer fixed supply items for my value. Fiat always leads to corruption and fraud as we see in the world today.

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although we're heading to digital world where most our currency will likely be a digital currency but Bitcoin can not be a reserve currency or take place of USD in terms of fixed money

USD is collapsing. No fiat currency lasts. But USD has been the biggest supporter of fascist power in world history. they print it and pay off bribes to leaders all over the world. Even by there rugged stats is constantly goes lower every decade in buying power. We just live in a world and a time of fiat. This isn’t going to end well. I agree bitcoin won’t be any kind of official reserve currency but it’s deflationary design is certainly a good thing. We have never seen fist work in thousands of years of history. Gold worker for thousands of years and fixed items will be king in long run.

I agree that Btc is not the only currency in the crypto space and it cannot be. Every day now and then if not better than competing assets are in line.

Go BTC! I sure damn well wish i had a lot more tokens in my stack! Guessing this token will be around for the long-haul. Also, Go Hive!! :)

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Of course BTC will not be world's reserve currency!!

HIVE will be!!! 😜

Its always illuminating to read you taskmaster.

!LUv

For secure transaction BTC is my most favorite, you have explained such valid reasons and I agree with each point you've discussed.

These are some great points and they also answer a lot of my questions about BTC and limited supply currencies.

It's funny that I had this same argument on Reddit in 2018 and everyone was calling me crazy. Limiting the supply and letting people get in early will always force them to become hoarding goblins at some point.

We are going straight back to Feudalism but no one seems to care because it's all decentralized and on a blockchain...

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Fiat never works in all of history. It always ends badly. Since coming off gold currency in 1933 the dollar has lost over 98% of its spending power. The dollar is used to bribe world leaders and fund wars that never would happen without fiat since real money would of run out or the taxes on the population would stop it as people would rise up. Fiat aka printing without taxing or creating value leads to the worst evils we have ever seen. The dollar won’t last another 50 years in its current form. Thousands of years of history show us this. I dunno if Bitcoin is the answer on this large scale but hard money of one kind or another is definitely the solution. Fiat currency never works in thousands of years of history. The dollar will not last in its current form. The damage already done is beyond anything seem.

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Yeah, I don't think Bitcoin is going to be the one reserve currency. Who knows what will take the place of the USD in terms of what most things are based one. I don't think we're gunna be saying gas costs 0.0001 BTC/gallon any time soon, if ever. Still fun to think about though.

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BTC maxis are hoping that we will switch to representing value in Sats once they all become filthy rich and acquiring 1 BTC becomes inconceivable to the ordinary man.

Such equality, much innovation.

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But it isn’t far fetched to think so. Especially with the way things are going. It really takes only one tiny snow ball to be kicked into motion, which already is. Maybe in the next 2 decades it will really happen

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They actually might get rich off 1 BTC although not for the reasons they think. It will not be the reserve currency but could be the main unit of collateral. That could send the price flying.

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Very cool.

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Hey @taskmaster4450le

Do you mind if I do a friendly post arguing the other side of this and mainly the Dollar as world reserve currency post also? I’d like to post link to your posts and give my take. Just didn’t wanna do without asking and post your links at bottom and have you think it wasn’t a friendly debate or something. Let me know 👍

Cheers 🍻

This is fundamental to have some satoshis hidden somewhere.
You never know when BTC will change the order.

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The biggest issue is that bitcoin itself is nothing like a currency. That's why nothing else works in theory with it being a reserve currency.. it can't even be a normal currency So let's take a stroll down memory lane..

Bitcoin is in a civil war with Bitcoin Cash. Who's really correct in the great crypto war. At the core tenets bitcoin cash is correct. bitcoin cash is actually behaving like a currency in idea. the problem is it's never getting to the next level because it lacks the infrastructure. You see tons of money are poured into bitcoin core from vc's and institutions and miners want to keep bitcoin impractical so they can make money off high mining fees. Institutions wanna keep it speculative so they can control all the money all the way up.. The problem is this approach does not spread economic prosperity. Without the spread of economic prosperity you can never have a flourishing economy.

So first off they have this shortsidedness to even see it getting to something like a reserve currency as long as they can line their pockets.. prop up their balance sheets and books.. So this level of shortsidedness and lack of understanding is a misunderstanding of how monetary economic systems work.

None of these cryptocurrencies are actual currencies, lol. It's like a big false lie to get your money taken or scammed. They shouldn't be called currencies. They should be called blockchain unregistered securities.

In relation to bitcoin there lies the genesis of this problem of bitcoin being this pawn and misused technology of banks and institutions and not the people. So the people who know better and really want to see crypto succeed will address this issue. So anything you get a bitcoin fork in idea. Which is why bitcoin myk is using bitcoin.. " to suggest that prior versions of bitcoin are inferior and not seen as useful. This is what a fork is.. If everything was right with bitcoin forks wouldn't have to exist. So forks generally denote some type of improvement or need or change in structure.. idea..and support of the people and network in which the blockchain serves.

Why would bitcoin myk be a better version of bitcoin? bitcoin myk equals more usefulness and bitcoin equals less. let's take the example of gold. The euro and usd gets traded more than gold which means people are using it more.. Most people in day to day life don't even use gold. So that would suggest the euro and usd moreso serves their needs than gold. And that's the bottomline on that.

So if the masses of the general populace don't use gold but the euro and usd. Who uses it? The same people who mostly use bitcoin. Generally people with disposable income which is not how a good currency works. A good currency is in the hands of a good portion of the population and regularly used.

Why does bitcoin myk get it right? bitcoin myk gets it right because first not many look at it like a speculative currency. At this point bitcoin myk is probably looked at more like a practical currency. So it's things going on in bitcoin myk and principles and faith and beliefs much like what you have in the usd.. If i hold a usd i'm not speculating with a usd tht one day i'll be rich. i'm using it for practical value.

So bitcoin myk is a practical value token. it's to supply 80% of the globe with the citizens dividend. it is based on a philosophical and political belief.. to some which then makes it a need and because it's free you're likely at some point to get to stable prices.. Why is that? As long as people see bitcoin myk as more useful to transact than to hold to speculate it is more of a transactional currency.. root word being " current" to move than something like bitcoin where year after year i lose money selling it in some cases. So these are just fundamental misunderings fo money.

So why don't people here on hive understand this yet.. The quite simple answer is ignorance .. plain and simple. At a near future economic catastrophy the united states is set to become more democratic socialist.. So what's inevitably happening is capitalism will die this slow death and thats not my idea. That's the idea of most level head thinking economist that we aren't going to march off into some capitalist utopian future, lol.

That the form of capitalism we've practiced that has done a horrible jobs making people stewards of the earth's resources. These horrible horrible stewards century after century try to convince us they are in the best capacity to administer this. So many of us due to the results are in total disagreement with that.

A currency is a system it's not ownership into a business.. or in these cases small businesses. So you aren't going to ever have a capable currency based on creating a small business. If you want to have an effective currency first think in terms of system like we do with bitcoin myk. First of all bitcoin myk is'nt really a for profit endeavor. That means whether bitcoin myk goes the way of profit or it just goes the way of freedom to transact our money dependably on a network. it doesn't mean to the moon. if it goes to the moon that's more like a side effect of growth and buying power. They can play together and often times do but to have a really successful currency there are many important details your projects miss. I don't understand how you all expect so much from them when the projects themselves dont understand anything about creating a world used currency. These are just dreams of people who don't know anything about what currency or even money is.

So bitcoin myk is seen as a system that represents the people by their own value. Their energy is converted into currency. It's not a shellgame. Their energy is converted into the currency itself by an algo that sworks for them the same way it works for everyone else who uses it. So literal energy that may consist of electricity like some wireless energy crypto projects wanna do.. decentralizes the market because it decentralizes the value of energy. Bitcoin MYK decentralizes the value of human energy. I't's not a shellgame.. you see.

So the bottomline is we got bitcoin that has michael saylor and another small group of people that own over 87% of the bitcoin network and of that ownership only about 1% of the network control that much. Now that should be enough to stop this entire conversation. That should cure the level of ignorance we have in crypto enough for most of us to seek another way.

Why doesn't it? it doesn't because there is something called willfull ignorance with shortsided thinking. The willfully ignorant has accepted the idea they won't be convinced of anything otherwise because much like burying heads in the sand they have in their minds accepted a convenient lie.. In other words they are slovenly lazy thinkers who don't want to fix crypto. They want someone else to do it and hope they can profit from it when they do.

The problem is people can make money from ignorance they do everyday all the time. However they will never evolve and i say a human who never evolves isn't much of a human either way.

So let's sum it up.. You need alot of people with a currency that they believe in and support typically it may denote some idea of a fair and equitable system and many people know that's stable. So America isn't just stable because it has nukes. it's stable because it also have some sense of what people believe is a fair idea. Eventhough it's breaking down and everyday our system becomes less stable. in its early stability it once use to call something the American Dream. so your currency needs that idea.. A fair stable secure system . So if i'm under a tyrannical system where it's whales with influence right? Well my money feels less secure there..

Next i need practical use.. the speed of the currency... the vendors and merchants who want it.. So if i went down to venezuela and i gave stores cryptocurrency and did workshops.. then i asked that store to accept the cryptocurrency. They would be more incentivized to do so because they have the cryptocurrency.

the citizen's dviidend that people have through bitcoin myk.. forget about the price of it. worry about if it's going to be stable and big.. and can get big in the future. if those possibilities don't exist in a realistic way then that means another project should be chosen. if my thoughts are right about the economic distress and upheavel that is inevitable we're going to see a differetn thought process in people. it won't be this capitalist make a trillion dollar business idea you're thinking of.

All that is getting less and less and more than likely going into the idea of the " social company" where after research it gets determined just considering a for profit business is enough. No in this idea we find out the more lasting or best situation for a company is being in a situation like dan price where a ceo gives every employee starting $70k a year including himself.... and how he created many profitable and thriving businesses doing this

Anyway i don't expect you all to have my handle and level of education on money. i understand alot of people are here just to get rich quick.. to dwell in darkness and ignorance.. to manipulate markets to gamble to kingdom come and nothing wrong with that, lol.. the thing is what many are now finding is that the way we've considered our economic systems aren't the most efficient and just wrong.. So i'd invite people to study and research and stop entertaining ideas about our economic systems we're regurgitated from someone else.

That in the long run there may be much more lasting and effective systems. it takes a certain amount of money sophistication.. discipline and maturity to get this.. i understand that but nevertheless it should be considered that anything else is a willfull ignorance that probably won't match the course of events that our future looks like.

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Bitcoin cash civil war? Bitcoin cash is less then 1% the value of Bitcoin. It lost already. Between the two it’s over

i guess it's a matter of perspective on that. i believe when bitcoin failed as a currency the space lost. I'm not exactly a bitcoin cash fan either but i do believe bitcoin cash atleast pushed a closer idea of bitcoin.

So as bitcoin just turned completely into a useless speculative device who won then? The banks and institutions and money men who always win when it's time to speculate with other peoples money. Currencies don't do that.

So the only thing people wanna use crypto for now is the chance to get rich.. nothing else, lol. so it's a las vegas poker chip. it's a lottery ticket essentially and it's controlled by the same money men who control fiat currency. So yes bitcoin cash did lose but so did we.

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I see a lot happening and it’s not just speculation. But I see in the mainstream what u mean. I just see outside the sheep and the major fund crowd a lot of use cases happening. But much speculation indeed outside of that. I just didn’t get the bitcoin cash comparison, bitcoin cash lost badly. But I see what u mean in overall space

I see a lot happening and it’s not just speculation

Give me an example of what you see happening?

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Lightening payments on podcasting 2.0

i'll have to look into that but what i understanding about lightening payments is they are on centralized nodes

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This is not correct. Anyone can run a node.

Those are some interesting points and I agree. It's more of the gold standard in crypto at this point which makes it an amazing collateral and store of value. Actually that is how I use my bitcoin. I usually wrap it in BTCB and then use it in Venus.io on BSC and use it as credit so I don't have to sell it.

For large transactions, yes, BTC, for average or smaller transactions, I am going the way of LTC lately, if I don't use Hive. For a while, there actually wasn't any BTC in the portfolio, but that has since changed since the drop, been getting some at these lower prices again.

I just don’t get the third on list about fixed things leading to bad outcomes. Or “ Fixed Money Equals Tyranny“. Fiat has lead to tyranny on a much larger scale. Not a comment on bitcoin but just in general it’s not even close. Fiat leads to more corruption and war then anything else

I tend to use LTC for my non-Hive transactions too.

BTC is the secure chain so I cant fault anyone for using it. The fees mean it will not be used as a means of payment for everyday stuff.

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The fees are almost nothing if you use lightening. Why would the argument not include this?

I have my love and respect for BTC, but for everyday payments, yes, there are much better options for sure.

If you use lightening it’a less then a lite coin fee. Why not use lightening?

  1. Not a Bitcoin maxi, if something else works better for smaller transactions, I use that.

  2. Because not all places or wallets I use are set up to use or accept the lightning network and it's just easier most times to just use Litecoin or Hive. Actually I have been transacting in stablecoins allot lately as well, mainly HBD, BUSD, or UST.

  3. If I have to sit and explain the lightning second layer to someone just to send some money cheaply person to person, I would rather spend that time and one of my account creation tokens and get them signed up to Hive.

  4. Layer 1s are always more secure to transact than layer 2.

I don’t see how it being complicated means it’s a wall to using it makes much sense. Second layer has been in works as a known needed addition for most of the time crypto has been around. If someone isn’t experienced with it in general it’s quite complicated just to explain regular crypto to a brand new user. Nothing worth it isn’t complicated and any blockchain at the same volume will have same issue. Respect the difference of opinion. It just doesn’t make sense to me. Any blockchain will have this issue at same volume if it’s proof of work.
just my take. Cheers

Bitcoin maximalists are convinced that Bitcoin is going to be the everything money. It will take over the world and very little will exist. Most of them are convinced that Bitcoin will usurp the USD as the world's reserve currency.

To be sincere with you, bitcoin can't become world reserve currency because we have many coin.despite the fact that we are in digital world does not make bitcoin become reserve currency

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Bitcoin could become a widely accepted currency but then its price is growing real high that owning a satoshi might be really expensive for the ordinary man.The USD is one currency that people know its value and it isn't as volatile as the Bitcoin although, I am a strong believer of BTC

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I believe Bitcoin is going to be the world currency soon and even surpass the USD or simply work side by side. it will definitely be adopted and used as an option for payment of services and goods fully it's just time.

Bitcoin can be the world reserve currency when more countries starts adopting it.

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I tend to think the biggest reason would be #4 because it incentivizes saving and this is bad for the economy. Why buy not when it will be cheaper later? It just doesn't seem to make too much sense.

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Bitcoin as already open many people eye to the right way to invest their money, secure transaction and risk of carrying money around. Bitcoin will definitely pave way for something huge coming

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I do not follow the bitcoin world enough... but I thought that most do not see it becoming the world reserve currency. I could be wrong though. I see it simply as the most secure network and a store of value because people will start "holding" like Michael Saylor.

I would love to hear your thoughts on the US dollar losing world reserve currencty status. I saw Ray Dalio posted a video about it. I have not watched it yet. Planning on doing that this weekend.

I think it was this one.

Thanks

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It's a great watch and I highly recommend it. Ray Dalio broke down seemingly complex economical circumstances into an easy-to-follow storytelling narrative.

I love the video and recommend it to my friends all the time.

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Ray just talks his own book. From what I have seen he’s just a shill who’s got much money invested in China and he thinks the CCP is just fine. I’d take his views with a grain of salt

Out of context but have you seen any video that explains Bitcoin in similar easy to understand way?

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I'm not sure if they have a BTC video specifically but Crypto Whiteboard is a great channel on YouTube that does just that.

All explanations are extremely easy to follow and understand.

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Thanks a bunch

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I would love to hear your thoughts on the US dollar losing world reserve currencty status

I linked an article at the start of this one to a post the other day that covered that. Although it is a bit misleading since the USD isnt really the reserve currency.

That is the topic of my next article.

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thanks and looking forward to it

what comes next? What replaces the USD? Another fiat currency? It's possible, but my guess is the days of trusting a centralized party to maintain a stable supply of a currency have come and gone. Why trust, when you can just verify? An argument could be made that gold is today’s reserve asset as it is held by the majority of central banks.

For me, gold is the past, while Bitcoin is the future. Bitcoin is decentralized, easily verifiable, immutable, divisible with a known supply and is easily amalgamated into an ever-increasing digitizing global economy.

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Whatever it is the dollar certainly won’t be the world reserve currency for past a decade or two tops. I’d bet by 2030 it’s no longer the top Dog:

Only time can tell right ?

Truth!

No. 2 is not true IMO. Not sure how you define "free market", but since the BTC in existence are traded on multiple exchanges without apparent state interventions, I would say, this makes it a free market already. The cap of 21 or 25 mio. is completely irrelevant, as the value will adjust. If a good is more scarce, its value will be higher and vice versa, therefore you have 8 decimals. Main point, it can´t be inflationed by a small group, like Fiat money.

No. 3 is likewise not true IMO. Money can be tyranny regardless if fixed or not, as long as the governance of that money is ruled by tyrants.
So some superwealthy people will accumulate all the BTC? Bad luck for them, since already half of the BTC (probably even more) is currently NOT in the hands of the superwealthy. Anybody can get some NOW, it is all open for grab. If some prefer to stick with Fiat, well it is their decision, you can´t blame the rich on that.

do not agree with any of your thesis.
Gold, in your opinion "fixed money" is the largest reserve of value, something very different from accumulating fiat in your bank. Not for that reason, it is negative for those who do not have the capacity to accumulate it. As you have said, all of this is largely due to ignorance, but over time people end up learning that in one country they sell ounces of gold and in another grams does not ultimately affect the understanding of the economic value of an asset.