The global economy has faced severe challenges in recent years, including rampant inflation and slowing growth rates since the post-pandemic era. With its decentralized nature, BTC has garnered both praise and criticism regarding its potential as a store of value. Given this context, let’s explore Bitcoin’s performance against major global currencies since its inception to determine whether it has truly served as a reliable store of value.
Once commanding considerable value, the dollar now equates to a modest 0.000016 BTC as of April 29, indicating a 99.5% decrease in value against Bitcoin. This disparity becomes even more evident when considering Bitcoin’s impressive appreciation of nearly 800% against the dollar in just the past five years. USD’s dominance in global oil transactions and the reliable backing of the American economy have further bolstered its position.
However, these strengths are counterbalanced by inherent weaknesses stemming from its status as a fiat currency. Unlike Bitcoin, which boasts a capped supply ensuring scarcity and, theoretically, value retention, the U.S. dollar is susceptible to inflation and devaluation due to overproduction—a challenge that has historically plagued fiat currencies. Recent trends in U.S. economic policy have further highlighted these vulnerabilities.
Its decentralized nature and fixed supply cap offer an alternative to traditional monetary systems, where the risk of government-induced inflation looms large. Established by the International Monetary Fund (IMF) in 1969, the Special Drawing Right (SDR) serves as an international reserve asset, representing a potential claim on the freely usable currencies of IMF members. Initially linked to gold and the US dollar, the SDR evolved in 1973 into a composite of five major currencies: the U.S. dollar, euro, Chinese renminbi, Japanese yen, and British pound sterling.
Now, let’s explore how major global currencies have fared against Bitcoin. The euro, a key player in the global economy after the U.S. dollar, has seen a notable decline in value relative to Bitcoin. As of April 29, the euro is valued at approximately 0.000017 BTC, indicating a depreciation of 99.49% since Bitcoin’s inception.
Similarly, the British Pound has depreciated by about 99.57% against Bitcoin, amounting to roughly 0.000020 BTC per GBP. Despite China’s stringent regulations on crypto usage, the Yuan has depreciated by 99.55% against Bitcoin, now valued at 0.000021 BTC. Reserve currencies gained prominence due to economic stability, geopolitical power, and institutional trust.
The British pound, sterling, and later the U.S. dollar rose to prominence during periods of economic dominance and geopolitical influence. Similarly, after World War II, the U.S. dollar became the primary reserve currency (59% as of 2020), supported by the strength of the American economy and the Bretton Woods Agreement. However, these currencies faced challenges, such as inflationary pressures and geopolitical shifts, leading to transitions in global reserve currencies over time.
Bitcoin encounters hurdles in these areas. While Bitcoin’s decentralized nature offers resilience against government interference, it also presents regulatory, security, and adoption challenges. Hence, only time will reveal whether Bitcoin can address these concerns and earn widespread trust as a store of value.