By the end of this year, the competition has intensified not only between the main currency pairs, EUR/USD and GBP/USD, but also between the two kings of the markets – the greenback and bitcoin. The former has been the leader among currencies for many years, and the latter has recently headed the crypto market. Experts believe that sooner or later the US dollar will have to concede.
Many analysts believe that in the near future bitcoin will take the throne along with the US dollar. Experts point out that the demand for the US currency as the key means of payment is gradually declining. According to Michael Ross-Johnson, CEO of cryptocurrency platform Chatex, the strong inflow of investments in BTC is associated with the risk of global recession caused by the COVID-19 pandemic and a decline in USD.
This year, bitcoin has challenged the greenback which has always been perceived as a safe haven asset. The current crisis and mass liquidity flows from the Fed put pressure on the US dollar which depreciated slightly against other major currencies. Many analysts emphasize that in the future the greenback will lose its status as a global reserve currency. This process has already begun.
According to analysts from the financial conglomerate Morgan Stanley, the US dollar has already started to depreciate, and this process will accelerate shortly. Morgan Stanley believes that although the USD has maintained its reserve currency status for almost a century, its continued dominance is under question now. The "aging" dollar is being replaced by an innovative means of payment - bitcoin, which has been showing steady growth despite its extremely high volatility. Sometimes bitcoin's rally comes to a halt and is followed by a decline, but then the situation stabilizes. On Friday, December 11, BTC traded near $17,942, having slightly retreated from previous highs.
According to Ruchir Sharma, currency strategist at Morgan Stanley, the demand for bitcoin has surged as investors are losing trust in local currencies. Market participants flocked to BTC amid central banks' massive money printing. As a result, since March 2020, the number one cryptocurrency has soared by an impressive 400%, becoming one of the best investment choices this year.
Another factor to support bitcoin was the fact that small companies used it in their international trade settlements which increased the attractiveness of the digital currency. Additionally, BTC gained more popularity thanks to cooperation with the major payment service PayPal. In November 2020, PayPal announced that its customers in the US will be able to buy, hold, and sell bitcoin and three other digital currencies directly with the payment service. According to the company's management, this function will become available to customers from other countries as soon as next year.
However, analysts have different opinions regarding short and long-term prospects for bitcoin. Some of them believe that BTC will not replace the greenback, since the cryptocurrency is not as popular in international settlements as USD. Indeed, about 80% of transactions in global trade are made in the US dollars. This helps the US currency to maintain its leadership in the financial sector. However, in the long term, bitcoin may be on the winning side. According to M. Ross-Johnson, digital assets are the future of the global financial system, and leading central banks support this view. A number of central banks are actively developing their own virtual currencies that will soon take their place in the new financial world.
