Dollar Devaluation Will Bitcoin Replace the Dollar as the Global Reserve Currency?

As the dollar falters, who can take its place?

After Biden came to power, the scale of money spreading is bigger than once.

On May 28, EST, the U.S. announced the federal government budget for fiscal year 2022, totaling up to $6 trillion, while the federal budget deficit for the new fiscal year is about $1.83 trillion. Since March last year, the cumulative size of a series of U.S. fiscal stimulus plans has reached $5 trillion, and Biden also recently proposed a $2 trillion infrastructure plan and a $1.8 trillion family plan.

The U.S. is bleeding money and the dollar is becoming less and less valuable.

Dollar Devaluation Will Bitcoin Replace the Dollar as the Global Reserve Currency?

Dollar Index Chart

As the U.S. dollar falters, the discussion of “who can replace it” is gaining momentum.

Recently, Dalio (founder of Bridgewater, the world’s largest hedge fund), who was once deeply skeptical of cryptocurrencies, revealed that he had purchased bitcoin and repeatedly mentioned inflation concerns.

According to Dalio, inflation is expected to be high, and the trend of dollar depreciation is difficult to reverse, so the 1971 dollar crisis may be repeated. In this context, cash is like garbage, he ” prefer to hold bitcoin instead of bonds “, ” with gold-like properties of bitcoin as a way to store value is increasingly attractive “.

It’s not just Dalio, bitcoin, which has been riding high so far this year, has attracted the attention of investors of all stripes, with bearish voices continuing to appear in the market.

In a recent interview with CNBC’s Squawk Box, billionaire hedge fund manager Stanley Druckenmiller said that a cryptocurrency-derived ledger system has the potential to overtake the U.S. dollar as the global reserve currency. He noted that if there is a replacement for the U.S. dollar, it “would be some sort of ledger system invented by some student at MIT or Stanford or some other engineering school and that could replace the U.S. dollar on a global scale.

Citigroup’s Global Views & Solutions Group released a 108-page report in early March titled “Bitcoin at the Tipping Point”. The report states, “Bitcoin’s advantages in global payments, including decentralized design, no foreign exchange risk, fast (and potentially cheaper) money movement, secure payment channels, and traceability, are attributes that, combined with Bitcoin’s global reach and neutrality, could drive it to become the currency of choice for international trade.”

Virgin Galactic Chairman Chamath Palihapitiya said Bitcoin is sparking a revolution that exposes the fragility of the traditional financial system. Taking the volume and size of the M2 money supply as an example, the question is if Bitcoin becomes the de facto world reserve currency, essentially replacing gold, then some sort of stable currency will replace the U.S. dollar.

However, Bitcoin’s sharp rise and fall has also made opposition evident.

In a recent interview, James Bullard, president of the Federal Reserve Bank of St. Louis, said that as far as the Fed is concerned, the U.S. dollar will remain dominant for the foreseeable future. He claimed that given the Fed’s policies, it will be a dollar economy for the foreseeable future. Whether the price of gold goes up or down, and whether the price of bitcoin goes up or down doesn’t really affect that. Since strong fiat currencies such as the EU Euro and the Japanese Yen have failed to replace the dollar as the global reserve currency, it would be very surprising to see cryptocurrencies accomplish this task. Therefore there will be no change going forward.

Marc Chandler, chief market strategist at Bannockburn Global Forex, says bitcoin is unlikely to replace the dollar as a global reserve currency anytime soon. He explained, “Underpinning the U.S. dollar is the largest, deepest and most transparent government bond market in the world, and from that perspective, I don’t see how bitcoin can replace the U.S. dollar.”

Nobel Prize-winning economist Krugman writes that virtual currencies could one day enter our daily lives and replace fiat currencies issued by governments, but at least so far, they have not done so and show no signs of being able to do so. Yet from time to time I still hear people claiming that Bitcoin, Ether, or some other weird virtual asset will quickly replace the US dollar as the global currency. This, of course, is even more extremely unlikely to become a reality, because how can virtual currencies be expected to become global currencies when they can’t even perform the duties of ordinary money? However, it is entirely conceivable that the dollar’s dominance will one day be replaced by some other normal currency.

In its Quarterly Investment Outlook report, wealth management firm Bessemer Trust notes that due to Bitcoin’s price volatility, it will not replace the U.S. dollar or even become a significant part of the current traditional asset allocation.

Alternatively, there are some relatively neutral voices who believe that bitcoin will not replace the U.S. dollar, but may be considered a reserve currency. Economist and former Canadian Prime Minister Stephen Harper has said that bitcoin may be seen as a reserve currency, but it will not replace the dollar’s role internationally. Also holding a similar view is Larry Fink, CEO of BlackRock, in his opinion, cryptocurrencies may become a great asset class, but cannot replace the US dollar.

Posted by:CoinYuppie,Reprinted with attribution to:
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