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Bitcoin (BTC) is replacing gold even as U.S. regulators try to disrupt its lead, Bloomberg Intelligence’s Mike McGlone said Monday.
The senior commodities market strategist attributed the “digitization of silver and finance” to the superior growth of the Bitcoin market relative to gold, noting that the same factors have helped the US dollar to dominate “quickly and organically ”on the precious metal.
McGlone’s comments emerged as takeaways from a recent three-day conference at the Bretton Woods Hotel in New Hampshire, which was attended by economists, macro analysts and investors, including Jurrien Timmer of Fidelity Investment and Amy Oldenburg of Morgan Stanley, among others.
Bretton Woods is popular among economists for hosting the United Nations Monetary and Financial Conference in 1944, which then led to the requirement for the United States, Canada, Western European countries, Australia and the Japan to link their currencies to gold.
As a result, the new monetary establishment earned the title of “Bretton Woods system”.
But on August 15, 1971, US President Richard Nixon took the dollar off the gold standard. Many economists hailed the move, appealing to John Maynard Keynes’ benchmark opinion that the gold standard was “a barbaric relic.”
The latest ‘Bretton Woods: The Realignment’ conference served as a metaphorical tribute to the end of the Bretton Woods system while focusing on emerging financial assets like Bitcoin that threaten to shift ‘dollar hegemony’ into the next one. global reserve asset.
In doing so, Bitcoin directly challenged gold’s position as a traditional competitor to the greenback, which, as McGlone said, is already happening.
# Digitization money and finance happens quickly and organically, the #dollar take the top, #Bitcoin replaces gold and US regulations are unlikely to disrupt its progress – these are our main lessons from the #Bretton Woods: The realignment conference. pic.twitter.com/Oy11l68Oqs
– Mike McGlone (@ mikemcglone11) August 16, 2021
Five decades of dollar domination
Princeton University economic historian Harold James argued in his July 2021 article that “digital technologies are spawning a new currency revolution that could end the global banknote altogether. green, “alluding to the role that crypto assets such as Bitcoin and Ether (ETH) could play. reshaping the world economy.
The statements have emerged despite the dollar’s ability to weather the worst global economic conditions over the past five decades and become the world’s reserve asset.
In detail, the so-called Nixon shock of 1971 led to double-digit inflation in the United States, causing the dollar to fall more than 50% against the Japanese yen and the German mark. But neither currency could replace the greenback in the race for global fiat hegemony.
The dollar showed strong recoveries in the first half of the 1980s. It showed similar upward movements in the second half of the 1990s – during the dot-com boom and bust. The greenback also emerged unscathed from the 2008 financial crisis and the economic distress caused by COVID-19.
Dollar shock coming?
But why did the dollar survive? Bloomberg opinion columnist Niall Ferguson provided three reasons in his latest report.
First, the greenback was supported by the Federal Reserve’s higher interest rate policies to reset expectations.
Second, the liberalization of capital markets, led by a boom in the Eurodollar and petrodollar markets, has boosted the international usefulness of the dollar, prompting foreign central banks to use it to execute international transactions.
And third, the power of the U.S. government to impose financial sanctions on countries it deemed undisciplined by White House policies – particularly in the aftermath of the World Trade Center attacks on September 11, 2001 – turned the dollar into a weapon. financial.
But James noted that the dollar has encountered unprecedented economic conditions in the wake of the COVID-19 crisis. The past 18 months have seen the US deficit climb to 13.4% of gross domestic product, the second largest since the end of World War II.
It expects to increase after the $ 1 trillion infrastructure bill the Senate just passed. The Congressional Budget Office said the stimulus would increase the budget deficit by an additional $ 256 billion over the next decade.
Meanwhile, another $ 3.5 trillion package, which focuses on poverty alleviation and the climate, is expected to be adopted by the end of this year. As a result, James noted that rising deficits have reduced the prospects for the dollar to rise in world markets. He wrote:
“Certain dangers are already visible on the Treasury market, where there have been tensions on liquidity (in 2020) and a weakening of foreign demand […] New money could therefore put an end to the dollar’s long period of hegemony. “
Bitcoin battles gold as an alternative to the dollar
The Federal Reserve’s lax monetary policies have resulted in supersonic price hikes in the Bitcoin market, as the steep rises beat gold, a traditional hedge asset.
Anthony Pompliano, partner of Pomp Investments, a longtime Bitcoin advocate, said in a note to clients that if one holds one’s fortunes in dollars, bonds or gold, his investments will produce “negative real rates of return. “.
“You are basically left with bitcoin or stocks, which makes you consider an allocation to bitcoin given the high degree of volatility that will likely be used to outperform stocks over a sufficiently long period of time.”
Pompliano’s statements have emerged despite potential regulatory challenges for emerging digital assets, as McGlone pointed out in his tweet on Monday. The crypto industry has faced a wave of attacks from Treasury Secretary Janet Yellen, Senator Elizabeth Warren and Gary Gensler, chairman of the Securities and Exchange Commission.
Related: What The SEC Can Learn From The German Regulator
But McGlone noted that the strict regulations couldn’t disrupt Bitcoin’s advance against gold. Additionally, Liam Bussell, head of corporate communications at Banxa, the crypto trading service, noted that U.S. regulators don’t want to shut down Bitcoin – they want to protect U.S. investors from fraud.
“The illegal schemes resulted in around 82,135 cases of cryptocurrency fraud in 2020 alone,” Bussell said, adding:
“US regulators that potentially touch on digital assets (CFTC, SEC and FINRA) are open to instrument diversification, as long as those instruments are fair and operate transparently.”
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move comes with risk, you should do your own research before making a decision.
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