Text︱Joanna
The epidemic has lasted for more than half a year, and the US economic recession is inevitable. Data show that the US GDP shrank by 31.4% annually in the second quarter, which is self-evident.
Some people believe that due to the US economic recession, the sustainability of the US dollar as the world’s major reserve currency has been tested. If this situation continues, who can shoulder the responsibility of the global reserve currency…
As a result, the saying that “Bitcoin is expected to become the next global reserve currency” is rampant. Although some people think this is a fantasy, people still enjoy it.
Liu Changyong, the initiator of FreeCash and an advocate for the crypto economy, said in an interview with the Nuclear Finance App that this statement is not new. “As early as the 2014 Beijing Bitcoin Summit, Mai Gang once proposed that’Bitcoin may become a national reserve currency’.” He said.
In the eyes of many Bitcoin believers, Bitcoin is a basic asset for breaking through centralized control and realizing financial democracy. The U.S. economy and the status of the U.S. dollar are mutually causal. With the Fed’s unlimited quantitative easing policy and huge amount of money printing, its negative effects will be infinitely amplified. In order to prevent “stepping on thunder”, news of increasing holdings of Bitcoin as a reserve asset has been reported frequently. Just imagine, with this as a beginning, Bitcoin may enter a new era of global reserve assets.
The U.S. dollar’s global reserve currency status is under threat
“Holding Bitcoin allows me to sleep well at night.” Former Facebook executive and Social Capital CEO Chamath Palihapitiya said in an interview with CNBC not long ago.
“Bitcoin is a hedge against the traditional financial world. You have to hold it instead of trading it.” He said that the United States prints a lot of money, and whoever is in power in the White House will see asset price inflation. And Bitcoin is not fundamentally related to traditional markets, because it is completely based on the opposite of tradition. We use 1% of the assets in our investment portfolio to hold Bitcoin as a hedge, and treat it as an insurance strategy to prevent the central bank and the government from “stepping on thunder.”
Not only that, but Willy Woo, a well-known crypto analyst, said that if you spend $1 to invest in Bitcoin on October 6, 2009, you will now get $13.9 million. Bitcoin is quietly engulfing the financial world. He also pointed out that US Treasury bonds exceed $27 trillion, which may cause Bitcoin to accelerate its decoupling from gold and other traditional financial markets to create its own price trajectory.
In view of this, people love Bitcoin, hoping to get the effect of hedging the traditional financial market.
US Senate candidate Cynthia Lummis recently stated that Bitcoin is a viable alternative to the value of the US dollar. She explained that there are only 21 million bitcoins, which makes it an attractive store of value.
“I have always been worried about the Fed’s quantitative easing program and the amount of debt that the U.S. economy will rely on in the future.” She pointed out that since March, the U.S. has increased its debt by $3 trillion. Cynthia Lummis quoted economist Nassim Taleb as saying, “The most underestimated risk in today’s financial markets is that the dollar is no longer a reserve currency. This is something we all should worry about.”
Dallas Federal Reserve Bank President Robert Kaplan said that the U.S. dollar maintains its status as the world’s reserve currency as “critical” because it allows the United States to repay existing debt at low interest rates. If you lose this status, you will face serious problems. He said that digital currency is a threat and may undermine the US dollar’s status as a world reserve currency. Digital currency will appear in some other form or way, and the United States must think about it so as not to lose control of its currency, especially from the perspective of monetary policy.
It shows that “Bitcoin is expected to become the next global reserve currency” is not groundless.
But after all, this dream seems difficult to achieve, and it may eventually come to nothing.
Marc Chandler, chief market strategist at Bannockburn Global Forex, said that Bitcoin is unlikely to replace the US dollar as the global reserve currency in the short term. He explained that the largest, deepest, and most transparent government bond market in the world supports the dollar. From this perspective, I don’t know how Bitcoin can replace the US dollar.
“I think Bitcoin is now more trustworthy than the U.S. dollar.” An industry insider who declined to be named said that from the current point of view, Bitcoin has withstood the test of the market. As people’s worries about the future of the world’s reserve currencies are increasing, there is now a pattern of currency diversification in the international reserve currencies. Even if Bitcoin has a one-tenth chance, we are willing to wait and see.
Bitcoin is better than fiat currency
“Bitcoin is exciting, it is better than fiat currency.” Bill Gates said in an interview with Bloomberg.
Hu Dinghe, director of the China Economic and Social Council and a doctoral supervisor, believes that in terms of trends, Bitcoin will not become a reserve currency, but will become a reserve asset. Like gold today, you cannot say that it is a reserve currency.
He said that Bitcoin is like opening a Pandora’s box of cryptocurrency. For more than a decade, there have been many people who “have what their heart desires, and have never lived in the past”, and they have gradually been accepted by the mainstream society.
Hu Dinghe believes that from the perspective of human history, when gold is used as currency, people find that its amount cannot be controlled. In the process of rapid economic development, gold production has obviously not kept up. Later, after a large number of gold mines were excavated, the problem of gold surplus appeared again. In addition, the colonial expansion of Western countries plundered a large amount of gold and silver, so that currency devaluation occurred.
After the signing of the Bretton Woods Agreement in 1944, the U.S. dollar’s status as the world’s official reserve currency was formally established. The U.S. promised to hold a large amount of gold and linked the U.S. dollar to gold and other currencies to the U.S. dollar.
“As the U.S. dollar is the world currency, the excessive issuance of the U.S. dollar is to harvest the world’s wealth, and its credit foundation will naturally be gradually weakened. Goldman Sachs has warned several times this year that the U.S. dollar faces the risk of losing its status as a world reserve currency.” Considering the economic stimulus and quantitative easing policies in the financial crisis triggered by the epidemic, if this continues, the US dollar will also be at risk of depreciation.
This year, Ray Dalio, the founder of Bridgewater Fund, stated in his work “Changing World Order” that people tend to think that currency is almost permanent, while “cash” is a safe asset that can be held. . But this is not the case, because when cash and bonds depreciate or are eliminated, the related currencies will also depreciate or die.
He stated that of the approximately 750 currencies that have existed since 1700, only 20% of the currencies remained, and all the remaining currencies were devalued.
“After the emergence of Bitcoin, it has a natural advantage over gold.” Hu Dinghe believes that, first of all, Bitcoin is obtained through calculations based on mathematical methods and the total amount is constant, and gold is obtained through physical mining. It is difficult to obtain and the total amount is difficult to control; secondly, bitcoin can be divided indefinitely, but gold is difficult to do this easily; thirdly, bitcoin is safe and easier to carry, and gold is not easy to carry and it is not easy to find a trading market .
Liu Changyong believes that because the market value and transaction depth of Bitcoin has increased many times compared to 2014, the global economic crisis and economic friction have also increased the risk of traditional reserve currencies. In view of this, this possibility has now increased. However, for large countries, the scale of Bitcoin is still too small to be used as a reserve currency; for some small economies, it may be considered appropriate to allocate Bitcoin in the reserve currency.
Bitcoin has highlighted the value of reserve assets
“Prepare for winter!” During the 11th long holiday, digital investment tycoons including Ricks “looked down” on the currency market on different occasions. Against this background, Lin Yun, who is heavily involved in Bitcoin, can be described as trembling, walking on thin ice.
Unexpectedly, since October 8th, Bitcoin ushered in three consecutive rises. Seeing this, Ricks called out on Twitter that he couldn’t understand it, which drew a wave of fierce battles in the comment area.
Lin Yun analyzed that this sudden rise is positively related to the stimulus from the news. “First of all, the payment giant Square announced that it has purchased 50 million US dollars of Bitcoin. In a statement, it said,’Square believes that cryptocurrency is a means of economic empowerment and provides a way to participate in the global currency system. In line with the company’s purpose’; Secondly, the Shenzhen Municipal People’s Government and the People’s Bank of China recently launched a digital RMB red envelope pilot program, issuing 10 million “digital RMB red envelopes” to individuals in Shenzhen, and spending at designated merchants in Luohu District within the validity period .”He said.
Shenzhen Luohu District launches digital RMB red envelope pilot
In fact, Square’s purchase of $50 million in Bitcoin is just the tip of the iceberg, and many undisclosed people have also bought a large amount of Bitcoin in the market.
According to data provided by BitcoinTreasuries, 11 New York Stock Exchange-listed companies have officially announced that they hold Bitcoin, with a total of 592,800, accounting for about 3.2% of the circulation. This shows that Bitcoin is gradually being accepted by mainstream institutions.
In addition, on September 28, Casa co-founder Jameson Lopp tweeted that Grayscale Bitcoin Trust now holds 450,000 BTC, accounting for 2.4% of the current supply.
Glassnode said that in the past few months, the number of Bitcoin whales (addresses holding more than 1,000 Bitcoins) has been on the rise. This sign indicates that more high-net-worth individuals are investing in Bitcoin and expect Bitcoin prices to rise. Glassnode data also shows that the number of addresses holding 0.1 or more bitcoins has reached 3,148,331, a record high. This shows that the number of holders of 0.1 or more bitcoins has been increasing since the beginning of 2010.
The number of addresses holding at least 0.1 Bitcoin hit a record high
“Although BTC cannot be maintained above $12,000, influential investment institutions and investors are collectively buying Bitcoin.” An analyst from TradingShot said that the on-chain smart currency indicator shows that after on-chain accumulation, the price usually enters Bull market trend.
According to Bloomberg’s October research report “Bloomberg Encryption Outlook”, in view of the “historical growth guide” and “demand and adoption trade-offs”, the bitcoin price is expected to reach $100,000 by 2025.
On October 8, Morgan Creek co-founder Anthony Pompliano tweeted that individuals have been using Bitcoin as a reserve asset for some time. Companies are now just beginning to use Bitcoin as a reserve asset. In the end, it is only a matter of time before central banks will use Bitcoin as a reserve asset. On October 11th, he also stated that according to statistics, 63% of Bitcoin’s circulating supply has not moved in more than a year. This is not to add value, but to protect wealth.
I have to say, Anthony Pompliano said the meaning of the question.
