Crypto Expert: The need for reserve coins is more important than ever!
The ongoing COVID-19 pandemic has drawn attention to the need for international cooperation and assistance. Combined with a fracturing economy, it shows us the time is right for a modern and accessible reserve currency. However, markets do not exist without supply and demand – there are many reasons why the US dollar has become the reserve currency for the world. To understand the structural values ​​of an economy and different markets, you must understand how different productive activities operate in times of crisis.
Reserve currency: shelter in crisis
During a global disaster like COVID-19, countries will want to hold onto US dollars, and now digital currencies, as their local currencies depreciate. The US dollar is currently the world's reserve currency, thanks in part to its ability to remain stable during global crashes. However, this is an oversimplified and misleading understanding of the true value and necessity of a reserve currency. Just as each great civilization will give way to the next, each reserve coin in post-Renaissance history has a lifespan of about 100 years, leading many to believe that the US dollar is in decline and will soon gave way to a new reserve currency. If there is to be one reserve currency - if not only one - it needs to be better than the world's current reserve currency: the US dollar.
What factors make the US dollar optimized for stability? The country's geopolitics, geographic isolation, and natural resources all play a part. A large population domestic market and stable trading environment also help a lot. All of these things benefit the United States a lot, but a new and innovative reserve currency should seek even more stability.
Could the new reserve currency be a digital currency?
For emerging markets, cryptocurrency is the complete solution because it is easily accessible and transacted over the network. As such, this is not just a move from fiat to crypto, but a new mode of production that includes what was once financially excluded.
In the 12 years since the birth of Bitcoin, cryptocurrency has become the pinnacle of international economic cooperation in modern times. Its value transcends political affiliation or sovereignty, instead, it is the result of algorithms and computable values. With the potential to completely replace the role of Governments and Central Banks, cryptocurrency is a real and viable candidate for the next world reserve currency.
However, cryptocurrencies also face many doubts about their role. In the past, reserve currencies were often owned by stable economies. The price of cryptocurrencies has high volatility, which is a sign that they are not able to withstand the weight of the global economy.
There are also concerns that cryptocurrencies will not be flexible enough to cater to the world's contracts even though these are candidates for the next reserve coin.
The third thing that primexbt hedge traders worry about, is that cryptocurrencies are owned by private companies, while, reserve money is always linked to governments. The worry here is that a business-owned reserve currency will be free to act for private gain.
Why now?
Basically, direct distribution is the original characteristic of cryptocurrencies. But to do this, the digital token must mine the decentralization network values ​​from which it is derived.
In fact, a new reserve currency could emerge at any time with any fiat currency deciding to act. It could be a superpower like China, or a country that has been stable for decades, like Japan. If countries like South Korea can afford to create a new source of production beyond exports, or if Australia, Canada or New Zealand become high-tech hubs, any of them could represent represents a relatively strong reserve currency.
When it comes to the influence of these reserve currencies during crises, we once again look back at the COVID-19 pandemic and see which socioeconomic classes have really been impacted the most. It becomes clear then that while countries can stabilize with reserve currencies, their most vulnerable are not. If we can solve this reserve money problem and actually benefit both institutional and non-institutional alike, then we will provide renewed economic recovery. As a result, we can solidify the economy as a whole for crypto, fiat, or other factors.
