According to Greyscale, Bitcoin is set to hit a new all-time high against the dollar. Those record highs come at the expense of the US economy, the firm's head of research said.
Bitcoin is about to earn its reputation as a kind of digital gold — for bad reasons for the US economy.
According to Jack Pondl, managing director of research at crypto asset management firm Greyscale Investments.
Fruit bet? The US dollar is really going to weaken.
“Regardless of who takes the White House in November, there are long-term macro trends,” Pandl said. NewsReferring to the presidential race between Vice President Kamala Harris and former President Donald Trump.
Pandl, a former macroeconomics and markets strategist at Goldman Sachs, said the dollar could depreciate over the next 10 to 20 years — or even sooner — depending on election results and the monetary policy of new incumbents.
If the dollar falls, Bitcoin's value will skyrocket in relative value against the currency. Additionally, investors pour money into cryptocurrency.
Protection against monetary decline
So how does that happen?
For decades, the US government has issued debt in the form of Treasury bills to finance its operations.
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The dollar is the world's reserve currency, so these bonds are always in demand from countries like Japan and China.
But that debt has increased. It is now worth about $33.2 trillion — 123% more than the country's gross domestic product, which will be about $27 trillion in 2023.
Government has to issue more debt to pay interest on existing debt. If this phenomenon continues, at some point the demand will not sustain the issuance.
The US government either defaults on its debt or prints more US dollars to buy the debt – causing an inflationary shock.
“Bitcoin became a trillion-dollar asset during a period when the dollar was exceptionally strong,” Pandl said.
Bitcoin benefits because its supply is limited to 21 million bitcoins, meaning it will never experience a monetary devaluation against the dollar.
“Do you know what happens to this property when we have a period of dollar depreciation?” Phuc asked rhetorically if Bitcoin would go to the moon.
Not everyone agrees that hyperinflation is inevitable, or that if it does, investors will see bitcoin as a store of value on par with traditional safe-haven assets like gold.
That's why bitcoin is still controversial in a way other cryptocurrencies like Ethereum aren't, Pandle said — bitcoin is essentially a bet against the US dollar.
“Bitcoin was created as a direct response and rejection of the traditional financial system,” Pandal said.
Crypto market movers
Bitcoin is down 2.1% in the last 24 hours to $58,600. Ethereum has declined 2.5% over the same period and is trading at $2,580.
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Tom Carreras is a markets correspondent News. Got a tip about Bitcoin and Ethereum ETFs? Reach [email protected]
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