Billionaire tech investor Peter Thiel courted controversy recently by highlighting Bitcoin’s potential in undermining the US dollar’s position as a global reserve currency. Thiel shared his opinion in an online seminar about Big Tech and China held by the Richard Nixon Foundation on Tuesday 6 April, 2021. Here, KBS’s Dr Timothy King, an expert in cryptocurrency, gives his opinion on Thiel’s thought-provoking claims..
‘Bitcoin will be increasingly important’
Bitcoinwillbe increasingly importantasmeans of payment and an alternative asset, there is no doubt about that,but it is unlikely to displace theUS dollaras the world’s reserve currency.For Bitcoin to be considered fiat, a legal tender, itshould, asa minimum,be usefulas amedium of exchange(i.e.a means ofpayment), store of value (i.e.the value of Bitcoin should hold its value over time and not perish or depreciate) and unit of account.
Although Bitcoin is increasinglyused asmedium of exchange,it is highly debateablewhether it will ever function strongly enough as a store of value and unit of account given its highly volatile nature.Furthermore,Bitcoin also facesstiffcompetition from central banksand countries who would be highly reluctant to forgo their dominant positions as issuers of fiat money. Many are already experimenting with digital currencies that utilise blockchain technologies.
It ispossible the comments ofPeterThielmay have not garnered the attention theyundoubtedly will iftheyhad come any othersource, yet some of his claims, althoughtendentiousare certainty food for thought,and may,in a perverse way,be somewhatpositive if they incite further discussion around cryptocurrencies amongst regulators.
Dr Tim Kingis Senior Lecturer inFinance,Bankingand Innovation at Kent Business School andDirector of the Centre for Quantitive Finance.
Find out about postgraduate Study at Kent Business School
FAQs
A new peer-reviewed study finds that cryptocurrencies like Bitcoin pose less of a threat to the global political economy than previously thought. The finding bucks the view of crypto an a global financial disruptor. Some cryptocurrencies, such as US dollar stablecoins, may even help boost US monetary power.
Does the US government hold Bitcoin? ›
Known Bitcoin reserves held by governments account for 2.7% of the total 21 million supply of bitcoins, with the largest being the US Government with over 210,000 bitcoins worth more than $13bn at the time of writing.
Does Bitcoin affect USD? ›
As with most commodities priced in US dollars, Bitcoin and USD share a negative correlation, historically.
What is the biggest risk to Bitcoin? ›
Cryptocurrency Risks
- Cryptocurrency payments do not come with legal protections. Credit cards and debit cards have legal protections if something goes wrong. ...
- Cryptocurrency payments typically are not reversible. ...
- Some information about your transactions will likely be public.
Crypto is volatile and a substantial risk. Invest only what you can afford to lose. Crypto scammers are experts at getting you to buy their digital assets. Be wary of “finfluencers” who get paid by crypto companies whether you lose money or not.
Will Bitcoin replace the dollar? ›
Will Cryptocurrency Replace Fiat Money? It's unlikely that cryptocurrency, in its current form, will replace fiat currency in developed countries. However, it is possible in financially struggling nations.
How to protect yourself if the US dollar collapses? ›
Though the U.S. dollar collapsing is unlikely, ways to hedge against it include purchasing the currencies of other nations, investing in mutual funds and exchange-traded funds (ETFs) based in other countries, and purchasing the shares of domestic stocks that have large international operations.
Can Bitcoin go to zero? ›
A reasonable assumption that Bitcoin could hypothetically reach the null state of it's value is worth the thought. Even-though such an event is very less likely to take place, there are some factors that could theoretically lead to Bitcoin price crashing to zero.
Can I cash my Bitcoin for US dollars? ›
A: Bitcoin ATMs allow you to sell Bitcoin in exchange for cash. You need to verify your identity, typically through a government-issued ID, phone number, and a picture. You then send Bitcoin to the ATM's wallet and receive cash equivalent. The transaction process can take around 10-20 minutes.
Why is Bitcoin not a good investment? ›
Bitcoin is a risky investment with high volatility, and generally should be considered only if you have a high risk tolerance, are in a strong financial position already and can afford to lose some or all of your investment.
Common arguments used are the high electricity consumption, volatility, lack of intrinsic value, regulation, hacking, criminal activities etc... Let's examine these arguments against Bitcoin one by one starting with the high consumption of electricity.
Should I trust Bitcoin? ›
Cryptocurrencies are still largely unregulated
If a platform that exchanges or holds your crypto assets goes bankrupt, there's a risk you could lose all your capital. Similarly, your assets could be at risk if an exchange holding your crypto is hacked by criminals.
What happens if Bitcoin collapses? ›
It is quite likely that a bitcoin price crash will result in a correction in their prices as well. It is also certain that the vast majority of cryptocurrencies that populate the current listings will disappear.
Is Bitcoin still a risky investment? ›
Bitcoin is a risky investment with high volatility, and generally should be considered only if you have a high risk tolerance, are in a strong financial position already and can afford to lose some or all of your investment.
Will crypto replace cash? ›
Bitcoin will not replace currency but instead offer people more choices as to which currency they can use to trade and store value and its technology will change how we conduct payments, banking and other financial transactions.
Does Bitcoin have a future? ›
Bitcoin has been the subject of many price predictions, some of them extreme. Notably, Cathie Wood, CEO of Ark Invest, predicted that bitcoin could reach an astounding $1.48 million by 2030. Obviously, the world's oldest cryptocurrency has come a long way since its first recorded price of less than a cent.
