The United States Dollar is not a commodity or asset-backed unit of account. Instead, it is a unit of international transactions that draws its value solely from the self-imposed title of an international reserve currency. Needless to say, the USD was given such a title by the United States, which took a dominating position in the world after the first world war and began to impose its economic model on European and other nations. The economic powerhouse that was the United States gradually took dominance in financial matters by establishing a number of so-called international financial institutions and related regulations, which were, of course, controlled by the United States government and served its purposes and political aspirations only.
Over time, the United States Dollar proved its popularity by virtue of being a means of no other resort in terms of international transactions. Most nations turned a blind eye to the fact that it was not even backed by gold and readily acquired treasury bonds issued by the United States, knowing that they would never actually be repaid. The result of a hundred years of uncontrolled Dollar issuance is a colossal foreign debt on the part of the United States government. If stacked together one on top of the other as one hundred Dollar bills, the debt would reach to the moon and halfway back.
The determining feature of an economy should be its self-sufficiency ensuring sustainable growth. It would be unfair to say that any economy in the world is truly self-sufficient in modern times. There were some vague hopes that the development of the digital economy would foster the arrival of an alternative financial reality, one that would be capable of challenging the dominance of the US Dollar. However, the collapse of several leading decentralized finance services and exchanges on the cryptocurrency market throughout 2022 shattered all remaining doubt that the digital economy is just as artificial as it is underdeveloped.
The Digital Alternative
The gradual development of the digital economy saw the introduction of several interesting assets that could have challenged the use of the United States Dollar as a reserve currency or means of international settlements. The USDT became a converter of value – a stable unit of digital accounting with its value pegged to the United States Dollar at a 1 to 1 ratio. The given currency, or stablecoin, could easily be used throughout the digital environment on par with fiat and act as a store of value.
By using a simple calculator, users could instantly see how much of USDT they would be receiving in case of conversion of their available fiat currency into the stablecoin. Needless to say, many holders of depreciating fiat currencies around the world rushed to convert their assets into USDT in hopes of storing what value remained. But the just questions that soon arose was whether USDT was actually stable enough and whether it would depreciate along with the United States Dollar.
Considering the dwindling power of the Dollar, USDT to USD exchange became more of a measure of necessity for Web3 transactions, rather than a means of value storage. The arrival or more volatile and attractive units like Doge or Dogecoin quickly eroded the positions that USDT held at launch as a panacea for crypto market volatility. Crypto users quickly realized that it is volatility which makes up the only true worth of the digital assets market, not stability, which promises no profits.
Key Takeaways
As the countries of the world are gradually moving away from the US Dollar and are practicing dedollarization, crypto users are starting to freeze their assets in cold storage in expectation of better times. The Trust wallet is one option that users are turning to along with non-custodial wallets and cold storage. In times of decreased market activity, most users agree on the fact that waiting out the storm is better than risking a splurge. The given approach may truly prove to be favorable in times of crisis, as only time will be able to show what fate has in store for the US Dollar. But one thing is certain – national currencies will soon go digital and these alternatives will be internationally accepted as means of settlements.
