There are far more great stories in the financial market in 2020, and no matter how you look at it, the recent strong growth of bitcoin can be considered one of the most eye-catching. Ruchir Sharma, a chief global strategist at Morgan Stanley Investment Management, pointed out that this phase of growth in virtual currencies can no longer be seen only by market cycles or bubbles, as the epidemic has profoundly changed the world — people in the future will be looking at this year.
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When the new Crown virus outbreak occurred, the dollar was as strong as ever. Although many people are saying that the US dollar's hegemony is being shaken, in reality, the US dollar still statically controls trade. It is still a currency associated with other countries and is still the main reserve currency held by most central banks.
The average duration of the US dollar hegemony is 94 years, and by the beginning of 2020, the US dollar has enjoyed this position for 100 years.
Although the hegemony of the US dollar has been longer than the average, people have every reason to believe that this situation will persist because there is no suitable successor. Of course, the US dollar now has challengers, such as the euro, but at least for now, it has not yet posed a real and substantial threat to the US dollar.
For this, American officials are also full of confidence. For example, when responding to an epidemic, they know that they can print banknotes without restrictions, without worrying about the worsening of the reserve currency situation.
But now, a new challenger is becoming more and more obvious, it is a virtual currency. Relying on P2P networks that no national government can fully manage, the virtual currency represented by bitcoin has emerged as a decentralized alternative and has won many supporters.
The outbreak of the epidemic changed everything. Powered by the Federal Reserve, central banks of various countries are printing large amounts of money, causing people to fear that countries will compete to devaluate their currencies, hence the demand for bitcoin has increased. In contrast, the price of bitcoin has quadrupled since March, making it one of the most sought-after investments of this year.
Since the advent of bitcoin in 2009, its proponents have always wanted to convince the world that it is a "digital gold", a reliable value-preserving tool that can help people preserve their wealth in chaotic times.
However, most people still have doubts. They feel that the volatility of bitcoin is very violent, and it is really difficult to feel safe. In less than three years, the bitcoin bubble burst once, and so far, Price fluctuations are still four times that of gold.
Investors who are older and have not grown up with digital technology are particularly skeptical about bitcoin. They support gold more, after all, gold is an effective guarantee against the devaluation of standard currencies for hundreds of thousands of years.
A survey conducted a long time ago found that only 3% of baby boomers (people born between 1946 and 1964) said they had virtual currencies, while among millennials, the ratio reached 27%. However, in different generations, the number of people accepting virtual currencies is increasing, which also shows that the roots of virtual currencies are getting deeper and deeper.
This brings a turning point for the dollar. Last year, after decades of growth, US debt to other countries was more than half of US economic output for the first time in history, and historical records suggest that such a ratio is often the precursor to a crisis.
However, as everyone knows, after that move, due to the epidemic, blockade, and economic shutdown this year, the US government had to increase debt further, bringing the foreign debt level to 67% of economic output, making it a danger zone.
Furthermore, neither the United States nor governments of other major economies have little sense of urgency to control the lack of inflammation. This means that even if the epidemic is over, money-printing machines can continue to operate at high speeds. The case
In, whether people want to see it or not, bitcoin will naturally win the trust of more and more people as traditional currencies become less and less reliable.
At the same time, bitcoin has begun to progress on the road to replace the US dollar as a medium of exchange. Of course, most bitcoins are now considered by their holders as an investment, and they have no intention of spending bitcoin as money, but this is now quietly changing.
Some smaller companies have started using bitcoin for settlement in international trade, especially in countries where it is difficult to obtain US dollars (such as Nigeria), or countries with highly volatile domestic currencies (such as Argentina). In recent weeks, both PayPal and its subsidiary Venmo have begun to reserve bitcoin and are ready to accept it as a means of payment starting next year.
The current boom of bitcoin has certainly formed a bubble, but even though the bubble has finally burst, the amazing progress made by virtual currencies this year is enough to ring alarm bells in the ears of crazy money printing governments.
People who are highly sensitive to technology are always looking for alternatives until they have found it, or they simply invent themselves one by one. At the moment, some governments are considering more vigorous measures to monitor the digital currency boom, which could actually accelerate the process of populist rebellion
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