In the last century the value of the dollar has declined. Over time, the currency that is used to conduct at least 80% of public and private international transactions has depreciated in value. At the same time, Bitcoin has grown in value and the number of transactions.
It is believed by experts that the dollar has depreciated since the beginning of the century with no signs of a monetary and fiscal correction that could reverse that fact.
In fact, the data shows that it was a reality that has caught the attention of experts in economic and financial matters. The dollar’s loss of purchasing power was an irrefutable fact, then the pandemic occurred. In this framework, all global economies began to collapse, and macroeconomic decisions were made in this context of health emergencies.
This is the global panorama Specialists like Stephen Roach pointed out in an interview with the BBC that the coronavirus effect flooded the world with dollars. In this regard, the countries of Europe, Japan and the United States began printing banknotes to help cover the costs associated with the pandemic.
This event eased spending, but created an inflationary spiral that has not stopped. Roach goes on to point out that in the middle of last year’s pandemic, the yuan or euro could not be compared to the dollar in terms of purchasing power as all currencies were printed to counter the effects of the pandemic, but now The dollar has already depreciated by more than 13% against other currencies.
In parallel Bitcoin in the middle of the coronavirus started an upward race that some specialists have not yet finished despite the current decline. As of April 26, 2020, Bitcoin was $ 7,641.86 per unit, according to CoinMarketCap. Since then, it has continuously and consistently recognized its worth, which has allowed several experts to focus their efforts on analyzing this behavior.
Bitcoin as a store of value
The users recognized the inflation effect caused by the large-scale impression of dollars. Therefore, they started looking for another asset that does not depend on a company that determines its value, but on the market itself, hence the capitalization of the Bitcoin market increased from USD 140,903,867 (April 2020) to USD 1,007,389,534 .360 (April 2021); after data extracted from CoinMarketCap.
This surge in the major cryptocurrency in the market shows that the main characteristic of the traditional financial market has been lost to the dollar and it is nothing more than trust. The data shows that the inflationary effects caused by US monetary policy have caused your currency to depreciate faster than expected.
The philosophy of a neo-financial system that has been powered by Bitcoin since 2008 is bearing its first fruits. The lack of regulation of a centralized entity that decides in the market about the value that a product or service should have had for the usability of Bitcoin continues from now on, we are not just talking about the Bitcoin ecosystem, but this growth has also given birth and dynamism to other ecosystems with new financial instruments that have attracted more users than the orthodox financiers who could foresee them.
Devaluation of the dollar against Bitcoin
The portal The Republic de Colombia released a graph from the US Department of Labor Statistics on April 19 showing how the dollar has collapsed dramatically this century.
To understand the impact of devaluation in this country depends on what a dollar could buy at any point in the graph, from buying products from 1913 through this year.
At that time, one dollar unit could buy 10 bars of Hershey chocolates, and today the same amount can only buy one McDonald’s coffee. According to the United States Bureau of Labor Statistics, the average inflation rate from 1960 to 2019 is estimated at 468%, i.e. That means that in 1960 a product costing $ 100 would now have to spend $ 568.
The graph of this government office shows the dollar depletion process in this century:
As a result, the usdsat.com portal shows us how the dollar has depreciated against Bitcoin over time. Speaking of specific data, according to this source, for April 21, 2020, you could buy $ 14,584 satoshi with USD 1, and at the same time this year you can only buy 1,933 satoshi, which is about 83% depreciation.
The following picture shows graphically how the dollar has lost its purchasing power against Bitcoin.
Possible causes for a devaluation
One of the possible causes of the devaluation is the printing of physical money without the financial support that economists so argue to skew Bitcoin. The use of banknote printing to treat Covid-19 appears to have created another phenomenon that is more worrying than inflation. And that phenomenon is deflation, it is precisely the depreciation of an asset over long periods of time and the United States central bank seems to have turned its gaze.
However, the North American country’s financial and economic reality shows that it spends much more on payments on imports than it does on exports or third-party payments, which translates into a budget deficit that they corrected with banknote printing in the market.
This continues to benefit the crypto ecosystem for now as an economic giant like this one pressures the market to turn to other alternative means of transaction without facing any apparent patrimonial losses. For this reason, in addition to the reserve of value, Bitcoin is added another feature that is also used as a unit of account and consequently it gives it a final feature, the “exchange method”.
Apparently, the dollar, which has been portrayed as the strongest currency in the traditional financial system for years, has far lost the battle against Bitcoin, the latter being an asset that is not subject to any political or economic decisions that determine its value.
To paralyze this deflation of the dollar, Washington must re-track the purchase of homes by foreigners on American soil. This has always been an additional way to increase your foreign currency savings and thereby further strengthen an economy that seems to be cold. Gil now.
Bitcoin, for its part, is an independent and decentralized currency and depends on the markets continuing to support their potential through higher market cap, price and ease of use to achieve the universality they want.
The opinions expressed in this article are solely the responsibility of author and they have nothing to do with Cointelegraph’s editorial policy.