Bitcoin celebrates new highs as USD plummets
The USD index shows a 7% drop since the beginning of the year, dropping below 90 for the first time in two and a half years.
- The dollar has been affected by global socio-economic uncertainty and rising inflation.
- Bitcoin has risen by almost 350% this year, as it is increasingly seen as a hedge against inflation and a store of value.
- The Trust Project is an international consortium of media organisations based on transparency standards.
The dollar index fell below 90 for the first time since April 2018. This is the lowest level by the Bitcoin Compass review for the global reserve currency in the last 2.5 years.
As the world, particularly the United States, continues to suffer from widespread economic turbulence, general uncertainty and rising inflation, the value of the dollar has taken a significant hit.
Throughout this year, the dollar index has fallen by about 7%, from around 97 to its current level of 89.96.
While global fiat currencies are struggling under the current socio-economic conditions, cryptomoney such as Bitcoin is suffering the opposite effect.
Protecting against inflation
While global fiat currencies are experiencing multi-year difficulties and troughs, the opposite is true for Bitcoin.
Since the beginning of 2020, the value of BTC has increased by almost 350%, with its peak market value rising from $120.4 billion at the beginning of the year to $419.5 billion currently.
As the world struggles to find the best way forward economically, Bitcoin and its predetermined supply and production rate seem to bring some stability in the midst of uncertainty.
Can Bitcoin replace the dollar as a store of value?
Traditionally, when a person seeks financial stability, they hold “safe” assets such as gold, real estate or a globally dominant currency.
With a global pandemic and a world economy at a standstill, partly supported by galloping inflation, many users and institutions are beginning to view Bitcoin as a safer cash asset than its alternatives.
There are many examples of institutions that are following this process of reflection. One of the best examples is MicroStrategy, a member of the S&P SmallCap 600 Index, which owns more than $700 million of Bitcoin and plans to purchase an additional $650 million.
Michael Saylor, MicroStrategy’s CEO, has decided that it would be safer for the company to have a portion of its cash reserves in Bitcoin rather than USD, as he sees Bitcoin as a stronger hedge against inflation. So far, Saylor seems to be right, as digital assets continue their steady rise after recently surpassing their previous record.
Although daily price movements are not an indicator of long-term strength or ease of use, Bitcoin has continued to recover with a daily increase of almost 20%.