Key facts:
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The influence of the main world financial power on Bitcoin is undeniable.
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If hyperbitcoinization becomes a reality, it would upset the balance of economic power.
Since its birth in the shadows of the 2008 financial crisis, bitcoin (BTC), the digital currency created by Satoshi Nakamoto, sparked a revolution: a decentralized economy, free from the shackles of central banks and the whims of state monetary policies. .
The rise of bitcoin From a digital curiosity to becoming a major player on the world stage, with a market value that has reached and exceeded one trillion dollars, it is a story of challenge and adaptation.
However, this champion of decentralization displays a curious paradox: its price is deeply intertwined with the economic dynamics of the United Statesmuch more than with those of any other country.
While a change of government in Paraguay or an economic crisis in Argentina, a country with a significant bitcoiner communityseem to have little echo in its price, every fluctuation in American interest rates or every tweet from a well-known Silicon Valley CEO can cause seismic waves in its price.
Why does bitcoin, despite its global nature, remain such a watchful spectator of events in the United States and seemingly indifferent to movements in other corners of the world?
The United States is the world’s financial capital (for now)
Several factors explain this behavior. First of all, it must be accepted as a fact that The United States stands as the backbone of the global economywith a gross domestic product (GDP) that leads the world ranking and an influence that permeates every corner of the financial market.
In this context, the economic policies and decisions of the Federal Reserve (Fed) are closely watched by investors around the world. The impact of these decisions is not only felt at American borders; Its shock wave reaches markets as diverse as that of cryptocurrencies.
A palpable example of this influence was observed in 2021, when the economic stimulus policies adopted to combat the effects of the global pandemic caused an increase in investment in assets considered “risky”including bitcoin, catapulting its price to new all-time highs.
The presence of the largest stock exchanges and financial firms on American soil also plays a very important role. Wall Street is not only synonymous with economic power, but acts as a barometer of global financial health. Fluctuations in these markets are reflected in the behavior of investors towards bitcoin, since many see this digital currency as an alternative or complement to traditional assets.
United States, land of investors and millionaires
Not only is the United States home to one of the largest and most economically active populations in the world, but it is also It is home to a significant proportion of the richest individuals on the planet.
According to data from the Statista portal, the United States It is the second country with the highest number of billionaires (people with assets of more than $1 billion) after China.
Top 10 countries with the highest number of billionaires. Fountain: Wikipedia.
Americans aren’t just participating as individual investors; As CriptoNoticias has shown in its publications, the US institutions and investment funds (much more than in other parts of the world) they have started exploring BTC as a valuable asset class. The arrival of spot ETFs in January 2024 increased this trend.
Additionally, the demographic profile of the US contributes to a fertile environment for the adoption of new technologies, including financial technologies. A significant sector of the population, especially millennials, has shown a predisposition towards investments in cryptocurrencies, which further drives demand and, consequently, the volatility and sensitivity of the BTC price to internal US dynamics.
The United States leads financial innovation
This country not only exercises great control over the global economy through its monetary policy and financial power, but also stands out as a leader in financial technology (FinTech) innovation. The concentration of talent, capital and technology companies, along with strong institutional and academic support, positions the United States at the forefront of this industry (which includes the development and adoption of the ecosystem around cryptocurrencies, such as exchanges and gateways of payment, among other products and services).
The American business environment is conducive to the incubation of technology startups. Venture capital firms with extensive experience and a focus on technology provide the financial support necessary for new ideas to flourish.
This has given rise to numerous innovations that later expand globally, including Cryptocurrency exchange platforms such as Coinbase and Kraken that have greatly facilitated the adoption of bitcoin.
Fed decisions impact bitcoin
The Federal Reserve, with its ability to influence dollar interest rates and the money supplyis a central figure in the global economy. Their interest rate decisions directly impact BTC’s appeal as a safe haven asset.
For example, when interest rates are low, investors look for alternatives to higher yields than Treasury bonds (considered by many to be “the safest investment in the world”), often leading them toward lower-income assets. speculative like bitcoin.
The Fed determines monetary policy in the United States. Source: stock.adobe.com
In 2018, a period of interest rate increases by the Fed coincided with a significant decline in the price of Bitcoin, demonstrating how conventional monetary policies can directly affect seemingly disconnected markets.
On the other hand, in periods of expansionary monetary policy, as observed during the COVID-19 pandemic, Bitcoin experienced notable increases, benefiting from the injection of liquidity into the financial system and the search for hedges against inflation.
The dollar is the dominant currency in the cryptocurrency market
What is the price of bitcoin measured in Argentine pesos? Not even we Argentines know. You have to go to the Ethereum-moneda-nacional-calculadora/” target=”_blank” rel=”noreferrer noopener”>CryptoNoticias Calculator to know it because it would be strange for someone to know that information by heart.
The US dollar dominates international trade and, by extension, the cryptocurrency market. Most BTC transactions are done against the dollarand many exchange platforms quote their prices in dollars.
This ties the value of bitcoin to that of the dollar. Changes in dollar strength can directly affect BTC, as A strong dollar generally means investors have less incentive to seek refuge in alternative assets..
Furthermore, the stablecoinswhich are designed to minimize volatility by pegging to fiat currencies (mostly the dollar), play an essential role in the cryptocurrency ecosystem. These currencies provide a bridge between fiat money and cryptocurrencies, facilitating fast transactions and reducing friction. For example, Tether (USDT), the most prominent stablecoin, plays a critical role in the liquidity of the bitcoin market and is directly tied to the US dollar.
As long as the dollar remains the main reserve currency and the most used in international trade, any fluctuations in its value or in US economic policy that affect it will have direct repercussions on the BTC market.
Bitcoin doesn’t need the United States to shine
The dominance of the United States in the cryptocurrency landscape reflects a counterpoint between the utopian vision of a decentralized economy and the reality of a world still anchored in traditional financial structures.
Despite the promise of autonomy that bitcoin represents, its dance with American economic dynamics underscores the complexity of completely disengaging from established powers. While today BTC appears to act as a mirror for the fluctuations and policies of the world’s largest economy, we may be only in the early chapters of a broader story of global financial transformation.
In a future where the concept of “hyperbitcoinization” becomes a reality —a scenario in which bitcoin not only challenges, but potentially replaces fiat currencies like the dollar in many of their traditional functions— we could see the balance of economic power being altered.
Bitcoin has its own foundations to stand out without the influence of the United States. Image generated using Dall-E, from OpenAI.
This change would imply that political or economic decisions in the United States (or the economic power that is on duty when that happens) would have a less direct impact on bitcoin, allowing it to fluctuate in value more independently, based on its own merits and internal dynamics.
Disclaimer: The views and opinions expressed in this article belong to its author and do not necessarily reflect those of CriptoNoticias. The author’s opinion is for informational purposes and under no circumstances constitutes an investment recommendation or financial advice.
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