To overcome this phenomenon, Bitcoin would need to become the global unit of account, much like the dollar is today. This goes beyond just the abandonment of fiat currencies.
Imagine if fiat currencies are abandoned and people return to using gold and gold-backed notes as their primary unit of account. In that situation, I think bitcoins would at best occupy the same space that gold already occupies in relation to fiat today.
Bitcoins would be treated like any other commodity: When economic turmoil strikes, speculators would sell them for safe haven assets like gold, gold-backed notes, and government bonds whose credit rating would be linked to gold reserves.
Imagine if fiat currencies are abandoned and people return to using gold and gold-backed notes as their primary unit of account. In that situation, I think bitcoins would at best occupy the same space that gold already occupies in relation to fiat today.
Bitcoins would be treated like any other commodity: When economic turmoil strikes, speculators would sell them for safe haven assets like gold, gold-backed notes, and government bonds whose credit rating would be linked to gold reserves.
Exactly. There's no other way around. Bitcoin needs to be the reserve currency of the world, in order for people to use it as a global unit of account. I know that's very unlikely to happen anytime soon since Bitcoin is decentralized. It's not issued by any government or central authority, which explains why many people still trust Fiat today. Considering that the USD has been the reserve currency of the world for a very long time, most people tend to trust it more than anything else for their everyday transactions. The only way Bitcoin will be used in times of turmoil as a safe-haven asset is if the entire banking system collapses. As you've said before, Bitcoin will be treated just like gold, when Fiat loses its value. But it will take a long time before this happens.
Nonetheless, I hope that Bitcoin would be used more as a store of value in the future as people recognize its benefits on top of Fiat. The pioneer cryptocurrency needs to solve some issues first (mostly scalability) in order to become used as an alternative to Gold or existing Fiat. The volatility issue is linked to the crypto market's small liquidity (compared to other traditional markets) and lack of regulation in the space. Once that's solved, money will start pouring in Bitcoin and other cryptocurrencies across the market. By then, Bitcoin will become a true safe-haven asset that will gather the likes of institutional investors, average individuals, and businesses alike. After all, Satoshi designed Bitcoin to be an alternative to the existing monetary system. Sooner or later, Bitcoin will be used more thoroughly when undesired events happen in the mainstream world as people put their faith on mathematics and cryptography instead of corrupt governments and financial institutions. Just my thoughts
