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US Dollar Losing Reserve Status: Impact on BTC & Markets

Validated Individual Expert

We have spent a lot of time over the last few weeks covering mainly macro trends as they relate to decisions at the Federal Reserve. Investors today are spending less time pouring over individual company balance sheets and are instead trying to predict how the Fed’s balance sheet is changing. It is disheartening as an investor to know that the government will decide the direction of your portfolio, but imagine how a country like China feels holding about $1 Trillion in US debt.

The US is just now seeing the repercussions of the “weaponization” of the Dollar in Russia as a consequence of the sanctions of the War in Ukraine. Virtually overnight, the US and other Western nations essentially cut Russia off from the global banking system by freezing over $300B in foreign exchange and gold reserves and severely limiting Russia’s access to the SWIFT payment system. Similar sanctions have been placed on countries that did not play by the rules of the US such as Afghanistan, Iran, and Venezuela.

Just this week, countries across the world have taken these actions as a wake-up call that it might not be in their best interests to be at the whim of the decisions of the US Government. The recent news of the BRICS nations (Brazil, Russia, India, China and South Africa) making plans to remove dependence on the Dollar and potentially create a new currency should come as no surprise. As you can see in the chart below, this trend has been ongoing for a while but will soon reach a breaking point as the Dollar continues to weaken.

What does this mean for your investments if the devaluation of the US Dollar Continues?

Based on the fact that we live in the US, we save in Dollars, get paychecks in Dollars, and receive dividend checks in Dollars. This creates an inherent lack of diversification that could be made up for in our investment portfolios. Investing in assets that are not directly correlated with the US dollar would be a way to gain diversification. This could include investing in commodities, such as gold or oil, or other assets such as Bitcoin or real estate. US stocks will not provide any diversification in a world where the US Dollar continues to devalue because they are generating profits in the falling Dollar.

It’s no surprise that gold would perform well in this scenario since we have historical data on gold versus the US Dollar. An ounce of gold increased in value against the Dollar from 1910 to 2016 by a factor of 58x. Although Bitcoin does not have as lengthy of a track record, there are reasons to believe that it could massively outperform gold in the near future. Much like the BRICS nations, I too am tired of the policies of the Federal Reserve dictating the gains and losses of my investment portfolio. Having a percentage of your net worth in Bitcoin is a way to opt out of the existing system that has allowed the government and its members to enrich themselves by controlling monetary policy for US citizens and other non-voting but Dollar-using countries across the world.

If some of the main reasons the US Dollar is under fire are the uncertainty of policy and the threat of “weaponization”, Bitcoin is the anthesis that boasts equality, inclusion, and decentralization. Countries that don’t want to be tied to the decisions at the Fed or the political polarization of a new BRICS currency could look to Bitcoin as an escape. Just as the separation of church and state was a difficult but ultimately welcomed change in history, the separation of wealth and state should have even more benefits for the masses. Of course, nothing will happen overnight or without its challenges, but there is no question that removing the hand of governments from the strangles of monetary policy would be a positive step towards a better human existence.

Joe Robert is currently the Chief Executive Officer of Robert Ventures, with over 20 years of asset management experience. Since he started Joe has created predictable double-digit returns for investors & Partners. Joe has invested in seed rounds with equity and tokens, along with a portfolio of Bitcoin, Ethereum, and other top cryptocurrencies.

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