17 Jan 2020 Pavel Petrov
Are Government-Based Digital Currencies A Threat To Bitcoin?
Bitcoin, the global crypto leader, is going to experience fierce competition in the face of central bank-issued digital coins. The rivalry could result in Bitcoin’s price taking a steep downward motion. Common beliefs include a better digital asset that could emerge and replace Bitcoin as the world’s biggest cryptocurrency. Furthermore, the currency swap may fortify government-backed digital currency, rather than decentralized solutions.
Despite the common beliefs, Bitcoin’s decentralized nature could turn out to be the most essential feature of the $160,5 billion market-capped crypto hegemon. In fact, the release of central bank-issued digital currencies, like China’s Peoples Bank Of China (PBoC) digital yuan project could cement Bitcoin’s place on the top of the crypto world.
One of the most crucial arguments against central bank-issued currencies states that government-centric transition to digital cash could compromise the security and trust of the whole financial system. Digital assets, controlled by governments and their central banks, are an easy way to possess domination on residents. Governments can block funds, increase inflation, as well as overall control over businesses and citizens.
The crypto community has always been focused on decentralization, security, and transparency. An individual for example, has the full control over their crypto money.
Bitwise Asset Management and ETF trends published a report, showing an increased interest in financial advisors who are keen on adding Bitcoin, as well as other cryptocurrencies, into their clients’ portfolios. Nearly 10% of all Registered Investment Advisors (RIA) relocate funds from portfolios towards digital assets. The research suggests the percentage of independent RIA involved in the crypto sector will largely increase in 2020. The document also shows 54% of all financial advisors think Bitcoin’s non-existent correlation against other currencies or assets as a primary reason to consider Bitcoin as an addition to client portfolios.
Furthermore, Bitcoin’s dominance over the other cryptocurrencies suggests the war between Bitcoin and altcoins is already over. The altcoin sector still sees minor gains, when compared to Bitcoin, which is currently trading at $8,839.05. Investors see the opportunity to invest in Bitcoin, as the development of sidechains could further eliminate the needs of crypto assets like Ethereum and Ripple.
However, the central bank-owned digital currencies era is beginning, as governments are developing and researching new options to digitalize their fiat currencies. Also, the regulatory havoc caused by Facebook’s Libra project further boosted the usage of Bitcoin. U.S. Congressman Warren Davidson even proposed Facebook “to simply adopt Bitcoin,” which highlights that he may not be familiar with the concept of cryptocurrencies.
Bitcoin, as well as some of the stablecoins, are also becoming a preferred way to store value. The crypto world saw a significant price boost as the U.S. forces killed Iranian military leader Qasem Soleimani. Bitcoin spiked with over 4% in a matter of hours. The jump means the crypto sector becomes recognized as a safe haven, especially for countries with unstable local currencies.
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