By Hassan Mehmood (Saudi Arabia)
Bitcoin is making its position strong against fiat currencies, which are severely vulnerable to high inflation due to economic uncertainty.
Strong Monetary Base of Bitcoin
Bitcoin is known for its limited supply of 21 million, which makes it superior over other financial instruments, including fiat currencies. Due to its charming features, Bitcoin has attained the 11th position in global monetary base entities. It has even left behind the Russian ruble after gaining a strong position in the global monetary base.
Fiat and other traditional financial instruments have become subjected to high inflation due to the Coronavirus pandemic and policies adopted by the central banks all over the world. Bitcoin, on the other hand, is going upward and is up 120% since the beginning of 2020.
Devaluation of most fiat currencies occurs as a result of unlimited cash printing on the part of central banks. Russia’s ruble is now behind the world’s leading cryptocurrency in monetary base besides the backing of gold. As Bitcoin is standing at $16,000, almost 1.2 million rubles become equal to one Bitcoin. If the primary digital asset becomes successful in claiming $18,000, it can easily overturn the Canadian dollar (CAD).
Also read:Bitcoin to Challenge Fiats
According to John Todaro, the research head at TradeBlock, Bitcoin can only challenge the world big fiats, such as Chinese yuan, the US dollar, and Japanese yen, if the price tag reaches the six-figure value. “We could see Bitcoin surpass other major fiat currencies, but it depends on how one measures the size of an FX market,” Todaro added.
Bitcoin’s strong position amid economic disruption makes it a powerful hedge like gold. According to Travis Kling in 2019, the chief investment officer at Ikigai Asset Management says that decreasing interest rates, monetary debasement, and dominant debt situations, could result in another global financial breakdown.
The World Bank also unveils that “global gross domestic product” will shrink by 5.2% in 2020 alone. “During the mitigation period, countries should focus on sustaining economic activity with support for households, firms and essential services,” World Bank advised countries to pinpoint economic issues.
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