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Digital dollar can help increase Bitcoin adoption

Ahtesham Anis
June 13, 2021
10:17 pm

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Digital dollar or CBDCs can not take over the region of Bitcoin
Issuance of CBDCs could attract more investors to other assets for storing their value like Bitcoin
Fund managers believe that although Bitcoin could face turbulence in the short term, the coming years will be more stronger for the asset

Bitcoin has the potential to transform the current global financial economy. Following the possibility of cryptos and the underlying technology, almost every industry has embraced it. On the other side, central banks globally are also studying the assets to launch their own national digital currency. In the race for Central Bank Digital Currency (CBDC), currently, China is winning with its digital yuan.

However, other nations like the United States, India, few European countries, and others are doing research on the potential of such currencies. Notably, Federal Reserve’s (Fed’s) Governor Lael Brainard is also advocating a digital dollar. Following the scenario, many are now concerned regarding how CBDC’s will affect Bitcoin.

Will a digital dollar disrupt the Bitcoin ecosystem?

Michael Shonnenshein, the Managing Director at Grayscale Investment, and Greg King, the founder, and CEO of Osprey Fund, recently interviewed CNBC. In the interview, both the fund managers claimed that a digital national currency would not be able to harm Bitcoin. Indeed, both of them agreed that CBDC’s trend could help push more investors towards crypto assets.

Michael noted that central banks around the world are seeking to introduce their own CBDC. Following the scenario, Michael claimed that CBDCs would not displace, take market share, or compete with decentralized crypto assets like Bitcoin.

According to Greg, Bitcoin has to establish itself broadly as a payment mechanism. Notably, the flagship cryptocurrency’s role as a store of value may only strengthen with the introduction of such CBDCs.

CBDCs could support promote Bitcoin

Amid the pandemic, when the value of dollars and other assets began to fall, institutional investors found Bitcoin as the store of value. Moreover, Bitcoin also helped the investors protect their value as an inflationary hedge. Since then, the emerging asset class’ bull rally has continued.

According to Greg, if all traditional fiat currencies convert to CBDC, individuals will be more pushed to assets like Bitcoin. If the central bank takes the digital dollar approach, it will have more control over the financial ecosystem. Notably, the control over the supply of money will also increase, ultimately pushing individuals to Bitcoin-like assets. Hence, Bitcoin appears to have a more strong year ahead, with adoption around the world.

Will Bitcoin grow higher in terms of price?

Michael is optimistic and stated that the institutionalization of Bitcoin has arrived and will stay. Moreover, it is encouraging to see who participates in the ecosystem and the extent to which they are participating.

On the other side, Greg highlighted that Bitcoin price is going to be higher. The asset can break decisively upward to cross the benchmark level of $40k. However, if again the currency takes a downward trend, then the investors could face some trouble. The ultimate performance of the asset is going to be bullish. However, Bitcoiners and hodlers need to take the mid to long-term view. Notably, the market condition shows a buy time.

Current performance of Bitcoin

At press time, Bitcoin is trading near the price level of $39k. Over the last 24-hours, the price has increased by more than 9%. However, over the previous seven days, the price is up by more than 6% only.

Since Elon Musk tweeted regarding the allegations of pump and dump and cleared his stance against BTC, the asset gained its bullish momentum back. Following the scenario, experts in the cryptosphere believe that Bitcoin will continue its bullish momentum.