- Bitcoin is set to hit a new all-time high against the dollar, according to Grayscale.
- Those record highs will come at the expense of the US economy, the firm’s research head says.
Bitcoin is about to earn its reputation as a type of digital gold — for reasons that are bad for the US economy.
That’s according to Zach Pandl, managing director of research at crypto asset management firm Grayscale Investments.
Pandl’s bet? The US dollar is about to get really weak.
“There are long-running macro trends that will play out regardless of who takes the White House in November,” Pandl told DL News, alluding 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 value of the dollar could depreciate over the next 10 to 20 years — or even sooner, depending on the outcome of the election and the new incumbents’ monetary policy.
If the dollar drops, Bitcoin’s value against the currency will skyrocket in relative value. Plus, investors will pour money into the cryptocurrency.
Hedge against monetary debasement
So how could that happen?
For decades, the US government has issued debt in the form of Treasury bills to finance its activities.
The dollar is the reserve currency of the world, so there’s always demand for these bonds from nations like Japan and China.
But that debt has ballooned. It is now worth almost $33.2 trillion — 123% more than the nation’s gross domestic product, which was almost $27 trillion in 2023.
The government must issue more debt just to pay the interest on the existing debt. If this phenomenon continues, at some point demand won’t be able to keep up with issuance.
The US government will then either default on its debt, or print more US dollars to buy the debt itself — which will cause an inflationary shock.
“Bitcoin became a trillion-dollar asset during a period in which the dollar was exceptionally strong,” Pandl said.
Bitcoin will benefit because its supply is limited to 21 million Bitcoin, meaning that it can never experience monetary debasement as the dollar can.
“Do you know what’s going to happen to this asset when we have a period of sustained dollar depreciation?” Pandl asked rhetorically, implying that Bitcoin will go to the proverbial moon.
Not everyone agrees massive inflation is inevitable, nor that if it does happen, investors will see Bitcoin as a store of value on par with traditional safe assets like gold.
That’s why Bitcoin is still controversial in a way that other cryptocurrencies like Ethereum aren’t, Pandl said — Bitcoin is essentially a bet against the US dollar.
“Bitcoin was created as a direct response and rejection to the traditional financial system,” Pandl said.
Crypto market movers
- Bitcoin is down 2.1% in the last 24 hours, priced at $58,600.
- Ethereum slumped 2.5% in the same period and is trading for $2,580.
What we are reading
- Trump memecoin surges 200% as son teases crypto project — why joke coins matter this election — DL News
- US Crypto Tax Rules: When Do You Have To Pay Tax On Cryptocurrency? — Milk Road
- Why Ethena Has Been One of the Biggest Losers In the Recent Market Correction — Unchained
- Shorting Crypto 2024: How To Short Crypto, Best Exchanges, Risks, & Examples — Milk Road
- Who are the randos that donated to Fairshake, the pro-crypto super PAC? — DL News
Tom Carreras is a markets correspondent at DL News. Got a tip about Bitcoin and Ethereum ETFs? Reach out at tcarreras@dlnews.com
