Mike McGlone of Bloomberg intelligence is adamant Bitcoin is steadily replacing gold despite U.S. regulators’ attempt to control its growth.
The senior commodity market strategist credited the “digitization of money and finance” behind Bitcoin’s rapid growth against gold, noting that this same phenomenon helped create a dollar-dominated world economy in only one century.
McGlone’s comments captured the attention of economists, macro analysts, and prominent investors like Jurrien Timmer, Emmy Oldenburg, among others attending a three-day conference at New Hampshire’s Bretton Woods Hotel.
Bretton Woods is an important landmark for economists and historians alike. After World War II, the United Nations Monetary and Financial Conference was held in 1944: This conference led to a set of agreements that were later upheld by countries such as Canada, Western Europe, Australia, Japan – even China would eventually tie its currency to Bretton Wood’s gold standard.
The gold standard became an issue of contention. On August 15, 1971, the 37th President Richard Nixon took it off, and many economists hailed this move as a significant step in American economic history.
The Bretton Woods conference served as a symbolic homage to the end of an era while focusing on emerging financial assets like Bitcoin that threaten to displace “dollar hegemony” and become the next global reserve asset
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What comes on the wings of a new invention is often challenged by what came before. With its lofty ambitions and radically different approach to value storage, Bitcoin has already begun taking shots at gold’s longstanding place as an alternative currency that could supplant dollars from its position atop international markets.
Five Decades of Dollar Dominance
A new article published by Princeton University’s economic historian Harold James in July 2021 has garnered a lot of attention and interest, suggesting that digital technologies are driving a monetary revolution. He hints at the possible role of crypto-assets like Bitcoin in reshaping the global economy to reflect these changes.
At the backdrop of the statement, the dollar has stood firm in the past five decades despite many economic hardships and is one of the world’s most popular currencies.
Nixon’s economic policy in 1971 led to a double-digital inflation rate, which prompted the U.S. dollar to fall by more than 50% against the Japanese Yen and German Deutschmark. However, neither currency could replace the greenback as it attempted global fiat hegemony throughout that period.
The dollar’s resilience is the stuff of legend. The greenback posted substantial recoveries in both the 1980s and 1990s, during economic booms (dot-com) as well as busts (2008). This exhibited its considerable strength when it resisted all manner of turmoil—from financial crisis to viral pandemic.
Dollar Shock Ahead?
Niall Ferguson, a Bloomberg Opinion columnist, gives three reasons why the dollar has survived based on the latest report.
The Federal Reserve’s raising of interest rates has stabilized the value of our currency and restored confidence in it.
With the liberalization of capital markets, foreign central banks turned to use dollars in international trades.
The dollar is the world’s most powerful financial weapon as the U.S. uses economic sanctions on unruly countries.
The dollar has experienced unprecedented economic hardship following the Covid-19 crisis due to a growing U.S. deficit of 13%. The past 18 months have seen the debt grow at an alarming rate and is now nearly twice as high when comparing it with records from post-World War 2 time frames.
The $3.5 trillion focusing on poverty and climate expects enacting by the end of the year. And this might cause dollars in the global market to experience deficits.
Bitcoin Battles Gold as Alternative to Dollar
The Federal Reserve’s unsecure monetary regulations have unleashed a dragon in the form of Bitcoin, which has been flying high and beating gold at its own game.
In his Monday tweet, McGlone points out the crypto industry has faced a series of attacks from Treasury Secretary Janet Yellen and Democratic Senator Elizabeth Warren.
Final Take by McGlone
“Bitcoin is on the cusp of becoming a mainstream currency, and hard regulations will not be able to stop it. Instead U.S. regulators wish for Bitcoin to flourish in order for them to protect investors from fraud.”
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