Economist and former Canadian Prime Minister Stephen Harper said that Bitcoin may well be used as a reserve currency, but it is still unlikely to take over the international role of the US dollar.
In an interview with Jay Martin of Cambridge House, Harper admitted that the dollar has long been in a downtrend. Although, at the same time, there are few viable international alternatives to the US national currency — even if you look at the euro and the yuan. Let us tell you more about the expert’s comments.
To begin with, we note that the importance of such statements is really great. The fact is that due to the constant criticism of the first cryptocurrency, some still consider it a scam. As representatives of Bank of America recently commented, Bitcoin is the «father of all bubbles», that is, the rise in its price is ostensibly inorganic.
Now, many experts are gradually changing their point of view and looking closely at cryptocurrency. At least seven large companies have invested hundreds of millions of dollars in Bitcoin last year.
Bitcoin as a reserve world currency
Harper is confident that Bitcoin will replace the dollar only in the event of any national cataclysm in the United States. Here is a quote from him, in which he shares his opinion on this issue. The replica is provided by CoinDesk.
Unless disaster strikes in the United States, it is difficult to imagine an alternative to the dollar as the world’s primary reserve currency. Apart from gold, bitcoins and a whole bunch of other things, right? I think you will see that the amount of assets that people will use as reserves will increase, but the US dollar will still make up the bulk of them.
That is, there are few objective chances to replace the dollar with Bitcoin, but there is still such an opportunity. However, according to the former Prime Minister of Canada, gold can also apply for this role. Although we are sure that gold, due to its indivisibility and transportation difficulties, will hardly cope with something like this, while a few dollars will be enough to send a million dollars in BTC.
Harper stressed that he is not an expert on digital currencies and has little understanding of how they can work as a store of value — something “very important” for a reserve currency. The former Conservative prime minister explained that each currency serves three purposes: as a medium of exchange, as a unit of account, and as a store of value. He acknowledged that digital currency is certainly a medium of exchange and can be a unit of account. That said, it is difficult to understand exactly how Bitcoin can preserve the value of an investor’s assets over the long term.
In fact, in the long run, BTC works as the best store of value. Over the years, its price has grown from hundreds of dollars to tens of thousands. Isn’t this a great investment? True, even rapid growth still does not guarantee Bitcoin’s place in the international arena for the dollar. In addition, cryptocurrencies are subject to cyclical corrections, that is, after a conditional several years, it can cost the same as today. But after reaching the next price peak.
However, over the long term, Bitcoin has proven its advantage more than once. As we learned last summer, a dollar investment in BTC in 2009 would have generated over $ 12 million eleven years later, while a similar investment in gold would not even have doubled. In this regard, we consider such a statement about the unclear prospects for the preservation of the value of investors’ assets in BTC rather strange.
Or, here’s another good example: if an investor had invested ten dollars in Bitcoin every week for the past three years, his investment of $ 1,570 would have turned into $ 7,271 today. At the same time, gold would only bring in $ 2,100.
We believe this situation is indicative of two things. First of all, experts confirm the decline in the importance of the dollar throughout the world and even admit the likelihood of losing its role as a global reserve currency. It is because of this that Bitcoin, among other things, can become a new leader in this area.
However, at the same time, there is a noticeable lack of knowledge regarding the operation of blockchain among economists and other professionals. As Stephen Harper himself confirmed, he is not an expert in the digital currency niche, so it is difficult for him to assess their prospects. Obviously, if the situation were different, the former prime minister would hardly be comparing Bitcoin to gold — now this is not entirely relevant. Especially considering the fact that they are ready to invest in cryptocurrency at the level of large cities.