El Salvador's bold move to accept Bitcoin as legal tender has left Wall Street wondering whether the main cryptocurrency will replace dollar.
Several companies, including Tesla, MicroStrategy and Square, already incorporated Bitcoin into their balance sheets without sparking a broader corporate revolution. Now, the focus is on governments.
El Salvador, which started using the US dollar as a currency more than 20 years ago, became the first country in the world to pass a law allowing the use of bitcoins in any transaction. President Nayib Bukele says the target is to counter the low status of the entire banking system, not to mention reduce the cost of sending remittances.
Considering this, will Bitcoin become an alternative to dollar? Bitstamp CEO Julianne Sawyer answered "no" and said BTC is too volatile to completely replace USD.
Even El Salvador's central bank president Nicolas Martinez said this is impossible to happen because dollar is more stable compared to Bitcoin. Cryptocurrencies are also affected by tweets, memes and Elon Musk, which is not very suitable for a national or global currency.
Just this year, Bitcoin quadrupled in value, while dollar dropped 5.5%. Then, in mid-April, Bitcoin lost almost half of its rate
In view of this, Bannockburn Global chief market strategist Marc Chandler said: "Bitcoin is very volatile, which is counterproductive for countries seeking stability. But countries peg it because their national currency has become too unstable, or they lost confidence in the market. "
Other countries such as Haiti, Guatemala, South Sudan and Liberia may be the next to switch to Bitcoin, given their dependence on remittance flows, high poverty and low financial inclusion.
Other dollar-based countries, similar to El Salvador, are also candidates to officially adopt Bitcoin and become less dependent on the Federal Reserve and US policies.
