By Craig Erwin, Ph.D.
Many cryptocurrency enthusiasts expect cryptocurrencies to replace the dollar. The dollar is a fiat currency, which means it’s backed by the U.S. government, not by an asset like gold. Of course cryptocurrencies are backed by neither a government nor an asset like gold. And unlike crypto, the dollar has a long track record, as the U.S. official currency since 1792.
Before 1933 the U.S. dollar was backed by gold, but the great depression forced the U.S. off the gold standard. Abandoning the gold standard gave the Federal Reserve, the U.S. central bank, more control over the economy. Although there are those who claim the U.S. should return to the gold standard, experts agree that makes no sense.
Right now the dollar is stronger than it’s been in two decades (compared to foreign currencies). At the same time many cryptocurrencies have been decimated, prompting crypto investors to sue crypto creators, promoters, and exchanges (the ones who really make money on cryptocurrencies).
According to The Motley Fool, there are over 12000 cryptocurrencies. Most of them will eventually be worthless. What makes more sense for purchases like groceries then? One of the 12000 cryptocurrencies, some of which have only existed for days? No, go with a currency that has been tested over more than two centuries, the dollar. Have you seen anyone buy a loaf of bread with cryptocurrency? No, we all use dollars. The number of purchases made using Bitcoin, the most popular cryptocurrency, is miniscule.
The dollar is used in transactions worldwide. People and institutions want a strong, time-tested currency that is accepted everywhere. Whether they want to or not, people and organizations around the world use the dollar. It’s not going anywhere.
Do you use cryptocurrencies to shop? If so, which ones? Are you confident that the dollar has staying power?
For more information on cryptocurrencies, the Federal Reserve, and the economy, click on the following links: