The "tension" or competition between the US dollar and Bitcoin can essentially be considered a collision of two different financial systems. There are several main reasons for this:
1. Decentralization vs. Centralization: The US dollar is controlled by central authorities such as the US Federal Reserve (FED). Monetary policies and supply are controlled by the government. In contrast, Bitcoin is a decentralized digital currency that is not controlled by any authority. This sets Bitcoin apart from traditional fiat currencies such as the dollar, and is seen by many as an alternative store of value to the dollar.
2. Inflation and Supply: The supply of the US dollar depends on government money printing policies, which can lead to inflation, while Bitcoin has a limited supply (21 million Bitcoins), which appeals to those who see it as a hedge against inflation.
3. Regulation and Legal Status: The growth of Bitcoin has attracted the attention of governments and regulators. Governments are discussing regulations to protect the dominance of the dollar and limit the spread of decentralized financial instruments like Bitcoin. The US government and regulators, in particular, are concerned about Bitcoin being used in illegal activities such as money laundering, terrorist financing, or tax evasion.
4. Global Power Struggle: The US dollar has long been dominant as the global reserve currency. The emergence of Bitcoin could be seen as a threat to this dominance of the dollar. Some countries and individuals may be looking to undermine the influence of the dollar by seeing Bitcoin as an alternative to the global financial system.
5. Technological Change and Innovations: Bitcoin and other cryptocurrencies have opened the door to new financial services and innovations thanks to blockchain technology. This innovative approach creates a conflict with the traditional financial system, and dollar-based systems have difficulty keeping up with this new technology.
In conclusion, the tension between the dollar and Bitcoin stems from factors such as monetary policies, technological innovations, centralization, and global balance of power.
