The influence of the US on the crypto market
The influence of the US on the crypto market
Crypto

The influence of the US on the crypto market

By Giorgi Mikhelidze - 2 Aug 2020

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One very important thing that the U.S. doesn’t necessarily realize is its influence over the crypto market and how much it could change the industry’s landscape. 

I’m not necessarily talking about banning crypto or investing heavily in them. In fact, the influence I have in mind has nothing to do with cryptos themselves. What I mean is the “residual” influence that the U.S. has over cryptos through its influence over the USD.

The dominance of the USD

The United States Dollar is the most sought after currency in the world and there is very little that could potentially change it. It has so much investor confidence in fact that tying anything to this currency has the potential to automatically make it an amazing investment.

Take the USDT as an example. It has slowly grown in volume ever since it was first introduced and is currently the most in-demand stablecoin in the world. Many are saying that it is the perfect opportunity to introduce cryptocurrency as a global currency, considering that it never changes its value.

Analysts from 55brokers have mentioned that there are numerous companies seeking partnership with USD Tether in order to accelerate their operations and somehow overtake their competition in their respective fields. In the majority of these cases, these fields are financial, and sometimes ever FX related.

In fact, according to this FBS forex review, there are companies that are offering withdrawals or deposits via cryptocurrencies, primarily through BTC and USDT, meaning that the adoption wave has already started through the first industry.

What can a weak USD do for crypto?

A weak USD is usually a sign for speculators that it’s time to invest as much as possible. This is usually because of the currency’s very clear pattern of recovering after a massive drop. However, these recoveries are always very different. If the US Treasury ever decides to delay the recovery of its currency, there is a very clear possibility that the majority of the US population will switch over to alternative means of exchange. 

This was the case in the past during the great depression, and it could be the case today through security tokens and stablecoins.

Therefore, whenever the U.S. Federal Reserve is making a decision about the fiscal or monetary policy within the country, cryptocurrencies will come up as a potential issue more and more as we progress the industry.

What can a strong USD do for crypto?

A strong USD is very likely to have a similar effect. The stronger the USD is, the stronger BTC becomes. Basically what happens is that BTC becomes more expensive for the rest of the world, thus making it a more desirable asset. 

For the US market, however, it’s an amazing way to benefit from the strong exchange rate of the USD without suffering too much from market manipulation.

For example, whenever there is a surge in exchange rate for the local currency, people tend to exchange it for others to somehow gain a bit more advantage, or they just spend more on foreign products. This makes the currency leave the local market, thus making it depreciate over time.

By exchanging the USD for cryptocurrencies, the locals are basically circulating their own currency within their economy, while benefiting from a completely different currency than no country truly owns.

This cycle could potentially benefit smaller economies that are desperate to strengthen their currency to increase the consumer purchasing power.

Giorgi Mikhelidze
Giorgi Mikhelidze

Giorgi is a Georgia software developer with two years of experience trading on the financial markets. He is now working to spread the knowledge about the Blockchain in his country and share all of his findings and research to as many crypto enthusiasts as possible.

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