In a post on Twitter, Ripple’s CEO (XRP) made it clear that the depreciation of the dollar is favorable to the rise of cryptocurrencies in this period of health crisis and uncertainty in the global economy.
The dollar has experienced a significant decline in the international market. In March 2020, it lost nearly 5% of its value on the foreign exchange market. Analysts predict that it could even experience a general decline of 20% next year. While cryptocurrencies have been spreading more and more after Covid, they have also experienced a downtrend. Bitcoin dropped to $7,900 in March for example. Afterward, Bitcoin rebounded to reach $11,000 in September. It is now the sixth most significant currency in the world. In July 2020, the price of Etherum increased by 50%. Ripple also increased by 2% in August.
Bitcoin technology is also expanding on the market. The Blockchain has become increasingly adopted by companies in many industries around the world. Spending growth in this sector has increased by 50% this year. According to IDC, the Blockchain market will reach 17.9 billion euros in the next four years.
In principle, fiat currencies have three main functions in any economy: unit of account, medium of exchange and store of value. The dollar being reputed for stability due to the good performance of the U.S. economy dominated the market in fulfilling these three functions. The fall of the dollar and other fiat currencies leaves a window of opportunity for cryptocurrencies to seize.
A company like MicroStrategy has increased its investment portfolio this year with more than $425 million in Bitcoin. Binance issued a Mastercard to customers in the European Economic Area to facilitate payments. International purchasing protocols are established based on cryptos. Some countries are starting to use Bitcoin as a safe haven against inflation.
Brad Garlinghouse, CEO of Ripple (XRP) observing the current trend of the economy and the stock markets writes on twitter account via a :
“The pandemic is throwing so many opportunities out the window… yesterday’s action goes against decades of precedent. Signs point to a further decline in the dollar in the short term (leading to greater asset diversification, which will certainly be good for cryptocurrencies).”
Cryptocurrencies by nature are highly volatile. None of the economic indicators explain their rise or fall. Their prices are fundamentally governed by the speculations of market players. It is true that the Covid crisis has propelled them to the forefront as substitutable assets for fiat currencies, but nothing says that with the end of the health crisis their price will fall.