According to Jack Dorsey, Bitcoin could replace the US dollar. That’s what emerged from an exchange of tweets with Cardi B.
Jack Dorsey and tweets about Bitcoin
The question was explicit:
“Do you think crypto is going to replace the dollar?”
Dorsey’s answer was blunt:
“Yes, Bitcoin will.”
Dorsey has been a huge supporter of Bitcoin for some time now, so much so that he left the management of the company he founded, Twitter, to devote himself 100% to his other company that deals with financial transactions (Block, formerly Square).
Can Bitcoin replace the US dollar?
However, despite Dorsey’s conviction, it may be challenging for Bitcoin to replace the dollar.
First of all, it would practically require the dollar to disappear for this to happen. To tell the truth, fiat currencies are not eternal, so much so that on average, their lifespan is only a few decades, but to date, it is really hard to imagine that the dollar could really disappear.
The fact that today, the dollar and Bitcoin coexist peacefully suggests that this situation is unlikely to change, especially in the short or medium term.
The case of El Salvador
For example, in El Salvador, where the legal tender was the US dollar until a few months ago, Bitcoin has been added as a second legal tender, but not as a replacement for the dollar. Now, in fact, El Salvador has two legal tender currencies, dollar, and Bitcoin, with the former, however, still widely more used.
Moreover, the dollar and Bitcoin have a big difference, making them currencies with different uses.
Inflationary and Deflationary Nature
The dollar has an inflationary nature and continues to lose value over time. On the other hand, Bitcoin has a deflationary nature, and so far over the long term, has always been able to gain value.
That means that those who own dollars are much more incentivized to use them, spending or investing them, while those who own BTC are actually disincentivized to use them. In fact, Bitcoin is increasingly viewed as a risk-on hedge against inflation, i.e., a currency complementary to inflationary currencies, not a replacement.
Why Jack Dorsey may be right
However, in some specific cases, Bitcoin can replace fiat currencies that lose all or almost all of their value. However, it should be noted that in those cases, fully devalued fiat currencies are often usually replaced by other fiat currencies precisely because of their inflationary nature.
If, however, we get out of the short and medium-term perspectives and focus on the long or very long term, Dorsey may well be right. But it remains to be seen whether Bitcoin will be able to survive longer than the dollar and whether in the future the dollar instead will not be replaced by another inflationary currency, rather than Bitcoin.