- Currently much of the world measures Bitcoin against the Dollar, but this does have a few downsides
- If inflation hits the Dollar, Bitcoin could soar in value, making the paring absolutely useless
- For now, there is no clear contender for a replacement to the Dollar
When everyone talks about Bitcoin’s value, they only really seem to measure it against the Dollar, the Pound or the Euro, but is this a futile exercise? As fiat currencies strengthen and weaken against one another based on economic and political factors, the various Bitcoin/fiat markets wobble around.
But, the biggest issue with measuring Bitcoin against a fiat currency like the Dollar is that the Dollar has no bottom. This in turn means that Bitcoin equally has no top. To fix this, we need to start measuring Bitcoin, and all other cryptocurrencies for that matter, against something far more tangible than a fiat currency.
Venezuela is a Prime Example
If this doesn’t make much sense, take a look at Venezuela. As the Maduro crisis continues, inflation continues to rise in Venezuela. Back in 2017 you could pick up a cup of coffee for 2,300 bolivars, but today that same cup of coffee will cost you more than 250,000 bolivars. Inflation has hit the country hard, forcing the value of the fiat currency down into the ground, meaning you need wheelbarrows of cash to pay for anything. This same economic hardship could come to the US Dollar, forcing coffee to go from $2 to $2,000,000 overnight.
If that level of inflation hit the US Dollar, then Bitcoin would currently be worth $9,150,000,000 – proving that Bitcoin has no top and by valuing it against the dollar serves no logical purpose at all. But, that leaves the question, what should we measure coffee against?
What Could Replace the USD?
The USD has been a global currency ever since the end of WWII and the Bretton Woods agreement was signed, so finding something to measure the world’s assets against is no easy task. If we were to even begin considering what we could measure Bitcoin and other assets against, the first options could be gold, oil and other commodities that have a real-world value and can be stored and used as a backing to the price of an asset.
So, for the time being, measuring Bitcoin against the USD isn’t a bad thing, but it’s best to plan for the future. If inflation hits the US and impacts the USD, we could see Bitcoin drastically rise in value without anything really happening. In order to prevent this and to keep Bitcoin stable, in terms of value, it needs to be measured against something else, or simply becoming the global reserve currency.
Whatever the outcome is, we know we’re definitely underqualified to make the decision. Crypto world, it’s up to you!
