One of the claims made often by cryptocurrency community is that Bitcoin will eventually become the global currency.
While many skeptics simply discard it as a dream that will never come true, a study by the UBS group has revealed that Bitcoin can topple the US dollar and other fiat currencies if it breaches the level of $213,000.
Traditional banking system
The banking system and fiat money used currently is based on a three-thousand-year-old system. The limits of fiat money are already stretched and still it is unable to fully support present day’s economic model.
In such circumstances, the only technology that has the capability to lead the financial world and create a borderless, neutral and frictionless monetary system is the decentralized P2P electronic cash network, and Bitcoin is the obvious choice.
Per the UBS report, Bitcoin must cross the threshold level of $231,000 to replace the greenback. Furthermore, Bitcoin should be “considered money or even a viable asset class.”
Bitcoin requires improvement to attain that level. More importantly, the network should somehow overcome the issue of scalability so that high volumes of micropayments can be processed quickly. Highlighting this aspect, UBS states “Our findings suggest that Bitcoin, in its current form, is too unstable and limited to become a viable means of payment for global transactions or a mainstream asset class.”
A research paper titled “Cryptocurrencies: Overcoming Barriers to Trust and Adoption” has laid down three requisites for cryptocurrencies to satisfy in order to take the position of fiat money and gain adoption. The three compulsory requirements are store of value, unit of account, and medium of exchange.
Investments in Bitcoin are already taxed by several governments. This contradicts UBS claim that Bitcoin is yet to attain the status as asset class. Furthermore, several Wall Street firms consider Bitcoin as money. Goldman Sachs had even sent a report titled ‘Bitcoin is Money’ to its clients.
Likewise, a research by the Imperial College London and eToro also claims that Bitcoin acts as a “store of value.” It is one of the requirements for any form of payment to be considered as money. Therefore, the research paper forecasts that Bitcoin could become a widely adopted method of payment over the next ten years.
Professor William Knottenbelt from Imperial College London and Dr. Zeynep Gurguc from Imperial College Business School have stated
“Cryptocurrencies are already equipped to fulfill one of the three fundamental roles of traditional fiat money: acting as a store of value.”
To satisfy the other two rules, Bitcoin and other cryptocurrencies must solve issues such as scalability and lack of regulation. If Bitcoin is able to resolve these issues, researchers say
“Given the speed of adoption, we believe that we could see Bitcoin and other cryptocurrencies on the high street within the decade.”
However, developers are already working to resolve the scalability issue. In particular, technical improvements such as Segwit have already brought down transactions costs. Likewise, Lightning Network is already facilitating instant payments, albeit some minor issues which are being worked out. Due to these advancements, crypto community is hopeful of seeing a fresh rally in the price of Bitcoin.
