BELGIUM (CoinChapter.com) — While most people see Bitcoin and the US Dollar as rivals, their market performance is very similar. So much even that the US Dollar keeps becoming more dominant while Bitcoin distances itself from gold. The big question is whether regulatory measures will impact the growth of either asset in the future.
One can argue the ongoing printing of money by central banks devalues currencies like the US dollar.
However, inflation is a genuine problem and one that will not go away automatically. For example, in the United States, goods and services become more expensive by the month due to the ongoing printing of USD notes. Although this trend isn’t unique to the US, the country sets an example for the rest of the world.
Despite the growing inflation concerns, there is a significant market dominance for the US dollar.
The Trade-weighted Dollar, an index maintained by the Federal Reserve, confirms as much. More specifically, the USD is competitive versus trading partners, such as other foreign currencies. As a result, its purchasing value remains, according to the chart, relatively high. Compared to other fiat currencies, the US dollar seems to fare slightly better stability-wise.
The current market position of the USD is not necessarily a recipe for future success.
If inflation worsens and more countries aim to reduce their reliance on the greenback, things can easily head in the other direction. That reliance reduction is a plan across the EU, China, Russia, and other regions. In addition, the rising popularity of digital currencies — including Bitcoin — has paved the way for different forms of money.
Digitization Of Money and Finance Expands
Two other driving factors for a potential future decline of the US dollar are the digitization of finance and money.
Digital currencies, as mentioned earlier, are gaining momentum. Central banks aim to get in on the action through CBDC efforts. However, these digital representations of traditional money may not offer the user any more financial freedom. Bitcoin and cryptocurrencies provide much more in that regard, contributing to their global popularity.
However, the advent of decentralized finance, or DeFi, puts even more pressure on the existing infrastructure. Through these digital currencies, anyone in the world can access financial products and services. Ranging from yield farming to insurance and everything in between, DeFi introduces multiple passive revenue avenues.
However, the volatile nature of crypto assets makes these potential returns fluctuate. Therefore, there are no guarantees of making a profit by exploring DeFi opportunities. However, keeping the US Dollar or other currencies in a bank account is almost a guaranteed loss at this point.
Investors looking for long-term safe-haven assets show a keen interest in the world’s leading cryptocurrency. Thanks to its solid yearly price performances, Bitcoin can retain and gain value. Likewise, gold will sometimes earn a minor US Dollar value, although it can hover near the same price point for years.
The Bitcoin-to-gold ratio depicts the current momentum rather well.
It currently takes 26.2201 ounces of gold to buy one full Bitcoin, valued at $47,000. In late November 2011, that ratio was 0.0016 ounces. Over those ten years, gold has not changed in value all that much. Bitcoin has risen from under $10 to an all-time high of over $64,800.
Both assets perform very differently, and Bitcoin is likely to keep gaining a more significant lead on gold as a safe-haven asset.