- According to Grayscale, Bitcoin will reach a new all-time high against the dollar.
- These record highs would be at the expense of the US economy, says the company’s head of research.
Bitcoin is earning its reputation as a kind of digital gold – for reasons that negatively impact the US economy.
This is according to Zach Pandl, head of research at crypto asset management firm Grayscale Investments.
Pandl’s bet: The US dollar is on the verge of real weakness.
“There are long-term macro trends that will have an impact regardless of who takes over the White House in November,” Pandl said. DL Newsand alludes to the presidential election campaign between Vice President Kamala Harris and former President Donald Trump.
Pandl, a former macroeconomics and market strategist at Goldman Sachs, said the value of the dollar could decline in the next 10 to 20 years – or even sooner, depending on the outcome of the election and the monetary policies of the new incumbents.
If the dollar falls, Bitcoin’s relative value against the currency will skyrocket. Additionally, investors will pour money into the cryptocurrency.
Protection against inflation
So how could this happen?
To finance its activities, the US government has issued debt in the form of Treasury bonds for decades.
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The dollar is the world’s reserve currency, so there is always demand for these bonds from countries like Japan and China.
But that debt has exploded, now totaling nearly $33.2 trillion—123 percent more than the country’s gross domestic product, which was nearly $27 trillion in 2023.
The government has to take on more debt just to pay the interest on the existing debt. If this phenomenon continues, eventually demand will not be able to keep up with the issuance of debt.
The US government will then either default on its payment obligations or print more US dollars to buy up the debt itself – which will trigger an inflation shock.
“Bitcoin became a trillion-dollar asset during a time when the dollar was exceptionally strong,” Pandl said.
Bitcoin will benefit from this because its supply is limited to 21 million Bitcoins and therefore, unlike the dollar, it can never experience inflation.
“Do you know what will happen to this asset if we have a period of sustained dollar devaluation?” Pandl asked rhetorically, suggesting that Bitcoin will literally fly to the moon.
Not everyone agrees that massive inflation is inevitable, nor that investors, should it occur, would view Bitcoin as a store of value on par with traditional safe-haven assets like gold.
That’s why Bitcoin, unlike other cryptocurrencies like Ethereum, is still controversial, Pandl said – Bitcoin is essentially a bet against the US dollar.
“Bitcoin was created as a direct reaction and rejection of the traditional financial system,” Pandl said.
Crypto market drivers
- The Bitcoin price has fallen by 2.1% in the last 24 hours and is currently at $58,600.
- Ethereum lost 2.5% during the same period and is trading at $2,580.
What we read
Tom Carreras is a market correspondent at DL News. Do you have a tip about Bitcoin and Ethereum ETFs? Contact us at [email protected]
