[Opinión] Cristian Arens: Can cryptocurrencies displace the US dollar?

Ray Dalio, leader of one of the largest investment funds in the world, believes that at this moment we are at an economic transition point where the dollar will eventually fall. Historically, currencies, in terms of value, generate influence and that makes it possible for world powers to be created. Since 1945, the dollar has been the main currency in transactions, having begun its heyday in 1921 in the aftermath of the First World War.

What came before the dollar?

The pound sterling was the predecessor of the American currency. These changes in the global economy are generally caused by economic depressions, conflicts or large-scale wars, and have a transition period of 20 years on average.

What is the life cycle of a coin as a leader?

Ascent. Worldwide, countries that show prosperity and leadership in foreign trade will be able to position their economy correctly.

Stop: Once the currency reaches its maximum value, labor in that country becomes more expensive. Something characteristic is that people work and contribute less to the gross domestic product since high salaries make them value their time more. This in the long term can be unsustainable and generate debts.

Slope. When a country’s economy cannot pay its debts it has two options: default or print more money. For obviousness they choose the latter and inflation causes credibility in international relations to be lost.

What is the problem with the dollar?

Currently, in the United States, the printing of banknotes has generated disputes in the internal politics of the state and has made it vulnerable to compete against the rise of the Chinese economy. Some analysts predict that the Chinese currency would be the one to start a new cycle in 2028, but its recent fall has put it under discussion.

The United States is no longer the most attractive destination for investors, which is why it has seen the acceleration of currencies such as the yen, but that is not enough for it to take the lead. However, several investors predict that the next cycle will be dominated by Bitcoin.

Is it possible for bitcoin to displace the dollar?

It is still too early to tell, but signs are emerging. Increasingly, cryptocurrencies are in greater demand, as the conflict between Russia and Ukraine has given them more influence and participation among people, institutions, and even countries.

Now, this does not mean that the dollar ceases to exist, but that it would have less weight on the international scene. Thinking of cryptocurrencies now as reserve currencies is increasingly a possibility and proof that globalization and digital transformation are the future of the next economic systems.