Bitcoin Forum

What if bitcoin (XBT) becomes the world's reserve currency and replaces the US dollar both as foreign exchange reserves and petro dollar..

Each and every country will fighting to buy bitcoins..

What will be the value of bitcoin then?

If the bitcoin (BTC!) becomes the world reserve currency, then banks will long have adopted it. They will have scared people because of security issues when holding BTC by themselves and they will have made people deposit and transact via the banks, which in turn allows the banks to work with IOUs instead of actual BTC.
This will result in the ability to massively inflate said IOUs by just issuing more of them as debt which will have to be repaid (plus a little extra). For this to not get out of hand an institution will be appointed bitcoin reserve bank and it will be able to control the creation of said IOUs on a pace they like.
As a result, the rich will get richer and the poor will suffer.

The value of a bitcoin by then? A lot less than now because it has been massively inflated with trillions of bitcoin IOUs everyone is forced to accept as settlement of debt.

In that case, a bitcoin IOU won't be worth nearly as much as a real bitcoin. Do you remember gold backed US currency? It use to be a gold IOU.

i think it can reach easily 10000$ then

Thats how it should be in a free market, but even today a $1 note is worth the same as a virtual $1.
If you are forced to accept IOUs as settlement of debt, then it's worth the same as the real asset it's supposed to represent as people can just not pay up in actual BTC and settle the debt later on with IOUs.

An increased value of actual BTC could be the case if people predict the system to fail soon and want to get something they can use even after that happened, but that would take lots of time and by them bitcoin would probably have been replaced.

Personally I value real gold a lot higher than gold IOUs (which I think aren't worth anything as it's well known there not enough actual gold to pay up on them) but most people think it's basically the same as they are told it's backed etc.
Fortunately we are seeing a shift in that mentality. It's slow but it's there. However, if we let bitcoin IOUs become the norm regarding bitcoin payment processing, we won't get out of the system. And it's not like thats far away. it's been done for quite some time by Gox and it's highly likely there are others doing the same as we speak.
Why wouldn't someone print free money if he has the option to do so? This is a scary scenario, I know. But it is what can happen and it is what people will accept as a given if marketed correctly and there is no counter pressure.
We have to be extremely careful in that regard these days. We as early bitcoiners owe our children a system that is a lot less corrupt and a lot more enjoyable than todays system. We have done a great job with the basics, now it's out job to not lose the free currency we all came to love. It has been done once with the Internet, the free speech channel and it can be done again.

That scenario you describe is not what "Bitcoin becomes the world's reserve currency" actually means. The system you describe is just the same system as now, just that banks would be able to hold Bitcoins as assets on their balance sheets. That's not at all the same thing as Bitcoin itself being a reserve currency. Reserve currency implies that parties are actually settling transactions in Bitcoin itself, and the design of Bitcoin is such that that kind of settlement is analogous to settling in a commodity money.

It might not be what it means, but it is what is almost inseparably linked with bitcoin becoming a world reserve currency and since the OP was asking for the price of a bitcoin then, I might as well take into account the major factors for it.

That's easy and has been answered a few times by big boys.

If BTC replaces the USD it would be worth roughly 1M each and if it were the only currency it would be around 3M each. At that point we would be dealing in satoshis, which would be worth 1-3 cents each.

I think there will be other currencies and so i think overall if BTC survives the next 20-50 years it should be anywhere between 100k to 1M provided it stays the main currency. So imagine things like ether and other coins holding a key part of the market but BTC staying the main thing 1M is possible with BTC being 30% of the world currency.

But keep in mind that for this to happen our society has to fundamentally change. this won't be quick and this won't happen without major fights.

There is also the chance that better currencies will take bitcoins place and then btc is not worth anything.

Okay what i meant was,my country actually buys a lot of dollars and keeps it in reserve, whenever the INR gains against dollar the reserve bank buys even more thus maintaining dollar ruppee at a range of 1dollar =60 rupees.

That reserve is actually to bail out in case a balance of payment crisis arises, which actually happened in 1991 and ever since became trapped with that loan shark IMF.

So i was actually suggesting instead a country throw that dollar away and buy bitcoin as reserve, as the value of bitcoin rises the foreign exchange reserve value also rises, thus greatly to benefit the nation.

If that happens government paper currencies will become worthless so governments will have to do what those of us who don't have mining equipment and bought early have done and offer up services to earn it, like a proper economy does, I expect though if governments become desperate and fail in a 51% attack they will devalue their currency first though to try and destroy it.

The established system will bring great violence before control is relinquished.  That's a given.

value will be that high as people want

It can only happend if they used btc for buying oil

Really.  The US dollar is currently the defacto world currency (although how much longer remains to be seen) so that means all other national currencies are worthless?  Euro? Pound? Yen?  Interesting.

If these currencies are so valuable and doing so well then why is everyone poor? Answer me that, the symptoms we are seeing in the currencies and countries you mentioned are not ones of a functioning economy.

Everyone isn't poor. The net worth of the world is estimated at $223 trillion.

I can't imagine Bitcoin will ever become a reserve currency, I just see this as a new protocol for entities to implement within their businesses. Similar to how email's protocol SMTP was built ontop of TCP/IP. This was built ontop of TCP/IP to serve as a protocol for wealth transfer and storage.

And goverments use internet, likewise let governments use bitcoin on top of internet to buy oil and foreign exchange reserves.

Sorry, you're right on the poor thing, not everyone is poor but most are.

Oh and LOL you think that number is real, I'll try to explain it to you though if you're going to actually read my explanation, what's happened is that what I would call the 'real' net wealth is essentially being doubled or tripled through money printing so it's a bit like taking £100 and then printing more money until you have £1,000,000 oh look! I just became a millionaire! They go around telling all their friend and other countries and they actually buy into it.

It's such a simple con that people fall for, but now everyone has realised what's going on and that people don't actually have products and services worth that much, fact is, to pick up that much net worth globally we'd have to either take up asteroid mining or take over Afghanistan completely and mine some giant holes in it to even come close to the numbers these central bankers have made up.

If you're actually bothered about learning how the bond market and paper money works this video explains it perfectly: https://www.youtube.com/watch?v=iFDe5kUUyT0

Hows that different than BTC being $580?

Watched a video of Jim Rickards being questioned by the editor of Reason magazine last night. He claimed that, in Jan 2011, the IMF drew up a ten-year plan to replace the USD with the IMF's SDR (special drawing right) as the reserve currency and currency of international settlements. The SDR is just one more fiat currency backed by nothing.

A little over three years into the plan, (again according to Rickards), the world's financial ministers are regularly progressing towards this end, discussing it along with the more mundane things that occur at their meetings.

I would prefer bitcoin take that mantle. But either way, looks like the USD's days are numbered.

The American people are naive and spoiled for sure but they would never accept the IMF controlling currency. That might be the thing that drives main stream Americans into bit coin.

All reserve currencies eventually are replaced and it always because the entity printing the reserve currency abuses that special status.  The dollar being the reserve currency means that other countries are defacto obligated to continually hold large sums of dollars.  To partially hedge those holdings they usually buy US debt (interest offsets inflation losses).  As long as the nations of the planet trust the reserve minter to not excessively devalue those holdings then the system "works".    Generally it works fine for 50 to 150 years depending on the restraint of the minter.  It does however distort the free market pricing of debt.  Since foreign nations collectively need to hold trillions of dollars in US debt it drives interest rates on that debt down and subsidizes the US government to spend spend spend.  I mean it is almost free money so what is a hundred billion here and a trillion there.  The US govt "wins" and everyone else "loses" and the more debt the US govt racks up the more likely a default is too occur (of the treasury just hyperinflation that debt away to avoid an official debt).  That leads to resentment and eventually a new currency is used but the process will repeat itself.  The US wasn't the first and it won't be the last.  It works as long as you trust governments to spend within their means and not abuse that special status. :)

http://azizonomics.files.wordpress.com/2012/01/20120103_jpm_reserve.png

The IMF wouldn't control or replace the dollar.  Under that plan (which I think is unlikely to happen) the SDR would replace the dollar as the reserve currency of the world.  For most of the history of this country the US dollar wasn't the world's reserve currency.

i doubt that would happen.

people would start demanding provable solvency.  that's already started in fact.
no one had that option before, but since the blockchain is transparent,
i think it will quickly become the norm.   

plus there's no need to have the IOU system with clearing houses, etc.
its no longer a debt based system -- you own the asset when you own a coin.

People who have a lot of bitcoin would be rewarded for their foresight. Any one could try to be an early adopter of bitcoin right now, but most don't, because they don't believe the cost is worth the chance that it will become a more widely accepted currency.

Those that risk their money by investing deserve any capital gains that would come if bitcoin does end up being big, just like they would deserve any losses they would face if it doesn't.

this scenario is just a deluded pipedream. i am willing to bet everything that i have that bitcoin will not become a world reserve currency.

More importantly, early adopters would only be able to spend their wealth once. Money continually circulates, so in the long run it is those able to earn a lot on a continuous basis that can spend the most, not those who have a lot of currency at one point in time.

perhaps.

but 5 years ago, if when Satoshi's white paper came out, and I said:
in a few short years, tens of thousands of merchants will accept
bitcoins and a single coin will be $600... you could have said
its a deluded pipedream and be just as plausible, if not more so.

Real wealth is much more than just money. Just like now, the wealthiest people in the world would be those with most non-cash assets.

you are comparing apples to oranges. it's more believable that bitcoin would become big, than it is to believe that countries all over the world will adopt bitcoin as its currency. it's just bitcoin fanboys dreaming of their btc being atop the mountain. there's just no way world governments would just relent their grip on currency reserves.. what, you think the people in high seats are such altruistic people that they'd let it slip?

When that happens Bitcoin will value at least $100K.
But, I doubt the US dollar will get replaced. The US dollar is still there but we're hoping Bitcoin will be more open to use as a global currency within the next few years :)

I actually think the hardest part of BTC (or CC's) has been done. The orders of magnitude it had to rise to get here are more than it has to go to 100K or even 1M.

eg 5~10e^6 since first listing, only 10~20e^2 for 100K and 10~20e^3 for 1M.

although the 1000-->9000 in absolute value is 10x more. Still its hard to argue that BTC is not still on a log graph growth.

reserve currency, well it would be a better reserve currency than any alternatives except for its POW. A POS currency and at this stage PeerCoin is going to be that. PeerCoins attributes are far better suited for reserve usage than BTC.

At some point BTC is going to have to fork to POS or POS/POW of some type.

The whole mining tax just makes it uneconomic vs pos / pow or pure pow, not to mention the drama of mining.

the people will just start using it as they cotton on that they can have their wealth inflated away, confiscated subject to capital restrictions, tracked, subject to insane judical systems and laws, inefficient taxation.

Not necessarily.  Look at how much money changes hands every block.  There's reason to believe bit coin will be big enough so that  a small mining fee of 0.1% will provide ample security.

at that 0.1% of a large market is still a huge amount, which will be arbitraged out by a POS or POS/POW systems that offers the same security.

not really sure what you mean.  how would you arbitrage across unconnected or different systems.

Look at the chart DeathAndTaxes posted. Do you notice a trend? What did each reserve currency has in common? Being a reserve currency is all about trade. The largest economy who trades with the most countries in the world will be economically dominant, and it makes sense for other countries to keep that dominant currency as a reserve. Can bitcoin be that dominant currency? Not until we have huge bitcoin forex markets. I believe the Chinese Yuan is a more likely candidate for the next reserve currency.

Expect it around 2020, 2025 on the outside.

For most countries whose currencies became the reserve, their currencies were initially backed by gold, which in turn could be seen more as an international currency than as a reserve. All other countries kept their own currencies intact (sometimes pegged to the reserve currency) but typically traded across borders using the reserve currency. China has recently set up many agreements with other countries to trade directly in Yuan, bypassing the USD and most notably with the Russian Natural gas deal announced last week. On a daily basis $USD3-5T changes hands.

For BTC to become a reserve currency it would first have to be adopted as a national currency. BTC is already an international currency but whether it will be used to back a national or reserve currency can only be answered over time. An interesting scenario would be for some country to suddenly dump a few $B into BTC to buy up as much it can in anticipation of BTC becoming more powerful. A few $B is a drop in the ocean for most countries' central banks to print. 

The petrodollar was an agreement by the US and the middle east that the ME would only trade oil in USD if the US provided military protection for the major ME oil suppliers, but especially for Saudi. It was put into place after the US took itself off the gold standard and it greatly extended the life of the USD even though it was no longer backed by anything. The death of the petrodollar is probably coming soon because the ME seems to running out of easily accessible oil while the US is producing more at home. Incidentally, 19 of the 20 WTC terrorists were saudi nationals but the US chose to invade Iraq.

Perhaps the Yuan will become the next reserve currency but it will have to prove its military strength first and China is definitely flexing its muscles into Vietnam, Japan and the Philippines.  About the only good thing that will come out of this is that we can say we watched history in the making.

Because Bitcoin didn't have an organisation behind it multiplying itself in secret to make it that price, somebody actually considered it worth that much in order to pay for it, therefore it's that price, that's how a real free market is supposed to work, prices will go down as people decide it's worth less than the highest price, but then it will go back up again.

If we obeyed the logic of other people claiming that by suddenly going up in price Bitcoin is a 'bubble' then going by that logic everything else should be a bubble including gold and of course we know that isn't true, ti's because the people throwing the term around don't even know what it is. Stuff like the housing market and the stock market were a bubble because instead of people trading it honestly and openly it was the central bank buying up everything in order to artificially keep it high.

You could argue that the $1000 high that Bitcoin reached earlier was a bubble because of the bot trading that was spotted but even then those of us who were in the know knew MTGOX was dodgy as fuck and weren't surprised by the market manipulation. I actually said myself before that Bitstamp's prices etc. were more realistic because they were actually going around filling orders and executing them properly.

In this case - for once - it's up to the people of these United States, and not up to the Oligarchs of USA Inc.

We the People will embrace crypto and reject fiat, and in doing so we will sever the strongest of the threads the puppetmasters use to control us. Money.

This will also destroy the wealth of any oligarchs stupid or stubborn enough try to cling to their power over us via fiat scrip.

Say goodbye to credit scores, by the way.

https://i.imgur.com/X936OTh.jpg

Reads: "gentrification is humiliation" and "credit score = slavery".

+1

Interesting assertion. What is your rationale?

His rationale is a complete misunderstanding of the fact that Bitcoin is already Earthcoin, it doesn't need to be [insert arbitrary sub-section of Earth]coin too.

"A reserve currency is a currency that is held in significant quantities by governments and institutions as part of their foreign exchange reserves."

So for BTC to become a 'formal' reserve currency e.g. where one country buys oil or coal etc from another country, those governments would first have to formally pass that ability into law. OTOH it could certainly become a de facto reserve currency (earthcoin) over time.

You've heard of separation between church and state.
Well, How about a complete separation of economy and state?

Huh? Who's with me?  ;D

If bitcoin becomes world's reserve currency the fraudolent bank system will dead.
We will have an honest money and a honest society.
The fraudolent and disastrous industrial policy of policy maker, in collusion with the bank system, will stop!

http://www.tiffanylovesbooks.com/wp-content/uploads/2013/12/leo-cheers.gif

Well fucking said.

"Billed shall be the warmongers! And then we get peace."
-Stefan Molyneux

The who will save the week from the bad and powerful players in that economy...

I personally believe cryptocurrency is the last stage of capitalism, the transition economy to the end of this neo-feudal society, toward a better, more just, more humane, more open, less deceptive society.

I suppose that is up to the next generation, the ones turning 18 now, and the ones being born now. Maybe some of them are reading this. I sure hope so. We need their creativity, their energy, their youthful wisdom.

save the weak from what?

To be honest I can't see it become the reserve currency of the world. The major governments wouldn't let it happen. Maybe they will create their own cryptocurrencies in some fashion, but they'll probably only make it if they have complete control over it, but maybe an actual decent government will use it fairly in the future.

save them from people like con artists

Valid point.  

Personally though, I prefer free market solutions like BBB, ripoffreport,
consumer report, etc... over government run consumer protection.    

Why goodbye to credit scores? There are people trying to implement credit scores with Bitcoin, nothing to stop someone from rating you and then getting lenders onboard to listen to them. :-(

the average life savings of people is $44k (rounded and exchanged from native countries currency into dollars)

223trillion / 7billion people = $31840

so the $223trillion figure does not compute.. the number should be higher

also many people are millionaires, billionaires, meaning for every millionaire there is atleast 20+ people with nothing saved in their bank accounts

for every billionaire they hold the life savings wealth that would/should have been spread amongst 20 thousand people.

so i think you will find that not every single person actually had $30k-$45k life savings. rather, the reality shows 1 billionaire vs 20k poor.. is the more factual statistic

Assuming the choice will be in the hands of governments, and not in the hands of the people. Push come to shove, in the 21st century, all governments serve at the pleasure of their people.

 
Hi Franky - I just PM'ed you - need your help with an issue I'm currently having.

assuming that figure is true, if everyone would put their life savings in bitcoin instead of local currency, bitcoin would be valued ~$1 500 000 (for 21 million coins)

for 13 million coins it's ~$2 400 000

Probably not even accounting for gold and other assets

Bad and powerful players are part of the state apparatus, Economic actors must serve customers and keep them happy to realize "selfish" profits.

Or are you suggesting that without the state to hold your hand, you would keep eating at a dirty restaurant which daily gives you diarrhea.
Do you need protection from Subway subs? Or the cops and "blowback"?
Windows is a monopoly that needs to be busted but the Federal Reserve Bank is blessed?!?

that would be interesting, maybe 50 years later we might see bitcoin becoming a world reserve currency

Well said, Franky.

https://www.imf.org/external/pubs/ft/fandd/2001/12/images/wade-c1.gif

http://2.bp.blogspot.com/_BWD3jaICbzg/TUBLOvaSX3I/AAAAAAAAAu4/lAvNGcpmPTA/s400/income+share+cocktail.jpg