In the context of economic recession, unconventional fiscal policies of the central bank, and subsequent inflation and currency devaluation, Bitcoin proved to be the only standard currency. As a result, more and more companies choose to embrace Bitcoin and exit the existing currency system. The reward is that they consciously avoided the inevitable disaster caused by macro risks. As the consensus becomes more and more confirmed, Bitcoin’s status as a global reserve currency is slowly taking shape.
Quantitative change causes qualitative change (Gradually, Then Suddenly)
So far, 23 companies worldwide hold approximately $10.5 billion worth of BTC, accounting for 3.74% of the total Bitcoin supply, including 15 publicly listed companies, 3 private companies and 5 ETF-based companies. Many people believe that this trend of companies buying and holding Bitcoin is a turning point in Bitcoin’s widespread adoption, and it is also the first major step in Bitcoin’s path to becoming a global reserve currency.
MicroStrategy is a well-known company that triggered this trend. This is a business intelligence company listed on NASDAQ. The company purchased approximately $425 million worth of bitcoin between August and September, becoming one of the first publicly listed companies in the world to hold bitcoin. MicroStrategy currently claims to have 38,250 BTC, accounting for about 0.182% of the total Bitcoin.
In its initial announcement in August, MicroStrategy informed investors that it is changing the company’s investment strategy to reflect the economic situation. The company chose Bitcoin, not the depreciating U.S. dollar.
The wording used in MicroStrategy’s official bulletin is not inferior. In the third quarter earnings conference call, the company maintained its decision to convert its main reserve assets, believing that Bitcoin has greater return potential than cash for investors. It even promised to buy more bitcoins.
Since publicly making its Bitcoin investment public, MicroStrategy has identified the pioneering cryptocurrency as a real safe haven, signaling to other companies and organizations around the world that it is worth entering the blue ocean area of Bitcoin.
Following in MicroStrategy’s footsteps is payment processor Square. Although Square is led by Twitter CEO and Bitcoin promoter Jack Dorsey, Square found that it had fallen behind when it adopted Bitcoin as an asset reserve. This allowed Square to invest 1% of its total assets (approximately $50 million) into Bitcoin.
Square Chief Financial Officer Amrita Ahuja said: “We believe that Bitcoin may become a more common currency in the future.” Dorsey believes that Bitcoin will one day become the world’s reserve currency, and he agrees.
Banks are buying bitcoin
For many people, the addition of companies such as MicroStrategy and Square to the purchase of Bitcoin suggests that banks may not be too far behind. The announcement of PayPal’s announcement of the integration of Bitcoin payments further strengthened this sentiment. Although payment giant PayPal’s sudden entry into cryptocurrency has its drawbacks, it is undoubtedly a catalyst for the adoption of Bitcoin.
Financial institutions will be forced to be in a competitive position, and even the central bank digital currency (CBDC) will not help them. Ultimately, the bank will provide bitcoin services. In fact, the U.S. banking regulator’s Office of the Comptroller of Currency (OCC) recently approved the institution to provide customers with cryptocurrency custody services, almost as if to herald this change.
As a result, after companies choose Bitcoin, the central bank will have no choice but to hold Bitcoin as a reserve currency. This is especially true as legal tender continues to depreciate. The central bank will either shrink on the sidelines and watch the company profit or join.
In fact, they have already begun to try.
Recently, Iran became the first country in the world to use Bitcoin at the national level. In order to counter US sanctions, the Central Bank of Iran plans to use Bitcoin to fund international trade, thereby authorizing miners to directly trade with the Central Bank of Iran.
Global reset
While the global economy continues to be sluggish, Kristalina Georgieva, managing director of the International Monetary Fund (IMF) in Washington, DC, called for a “new Bretton Woods moment.”
In a speech delivered on October 15, Georgieva talked about the impact of the new crown epidemic on the economy and the consequent debt desperation. In essence, she advocated a currency restructuring similar to the Bretton Woods agreement of 1944. Assume.
The Bretton Woods Agreement is responsible for controlling the value of currencies between different countries. It formulates a global monetary policy and is obliged to keep currency exchange rates within a fixed value relative to gold. The Bretton Woods agreement also positioned the US dollar as the first global reserve currency.
Some speculate that with the depreciation of the U.S. dollar and uncontrollable sovereign debt, the IMF is hinting at a new standard currency. Analyst Raoul Pal predicts that the standard currency will be backed by the central bank CBDC.
The problem is that the CBDC linked to the old monetary policy system will eventually suffer the same fate as the physical legal currency. According to Pal, the only long-term currency must be a fixed supply of hard currency assets, such as gold and Bitcoin.
Regardless of whether the International Monetary Fund heeds the warning, the Bitcoin adoption curve will continue to climb. In the end, the critical mass and inherent characteristics make Bitcoin the only viable option for the global reserve currency.
