As the world waits with bated breath for President-elect Donald Trump’s administration to take shape, one thing is clear – the global economy will play a significant role in shaping his Bitcoin policies. According to Ki Young Ju, CEO and founder of CryptoQuant, Trump’s stance on cryptocurrency will likely depend on how the US economy and dollar are perceived by the global investment community.
The Store-of-Value Assets: Gold and Bitcoin
Ju argues that when investors perceive threats to US economic hegemony, store-of-value assets like gold and Bitcoin tend to surge in price. This is because these assets are seen as safe havens for those looking to protect their wealth against uncertainty. However, with the US economy showing signs of strength, coupled with increased capital inflows into the dollar, investors seem to be expressing confidence in the greenback’s supremacy.
The Dollar Strength Index: A Growing Trend
Data from TradingView shows that the dollar strength index has been on an upward trend since October 2024. This is a clear indication of investors’ growing confidence in the US dollar as a safe haven currency. The trend is not limited to the US, with emerging economies also showing a preference for using US dollars as a store of value.
The Rise of Overcollateralized Stablecoins
The use of overcollateralized stablecoins, pegged to the value of the US dollar, has become increasingly popular in recent times. These digital assets offer individuals a way to store value and hedge against inflation, without having to hold physical dollars. According to Charles Cascarilla, co-founder and CEO of Paxos, these stablecoins will play a significant role in the future of blockchain technology.
The Utility of the US Dollar: Improved with Blockchain
Cascarilla believes that the entire financial system will eventually be on-chain, with dollar-pegged stablecoins being a cornerstone of this new economy. By bringing the speed and connectivity of the internet to the fiat currency, these stablecoins have the potential to improve the utility of the US dollar.
The Use of Stablecoins in Emerging Economies
Individuals living in jurisdictions experiencing hyperinflation often turn to the US dollar as a store of value against rapidly depreciating local currencies. This trend is evident in countries like Turkey, where the inflation rate hit 67% in March 2024. Not surprisingly, Turkey has one of the highest rates of stablecoin purchases, expressed as a percentage of GDP.
The Growing Demand for Stablecoins
According to a 2023 report from Chainalysis, over 50% of digital assets sent to Latin American countries like Argentina, Brazil, Colombia, Venezuela, and Mexico were stablecoins. This trend suggests that individuals are increasingly turning to these digital assets as a way to store value and hedge against inflation.
The Trump Effect: A Risky Bet for Bitcoin
With the global economy playing a significant role in shaping Trump’s Bitcoin policies, it is clear that investors will need to tread carefully. While some may be optimistic about the potential benefits of a pro-BTC administration, others may view it as a risky bet. As Ju noted, "Even before his inauguration, Trump consistently warned other world leaders of the power gap between the US and other nations." This rhetoric, combined with increased capital inflows into the dollar, could renew confidence in its supremacy.
Conclusion
The global economy will undoubtedly play a significant role in shaping President-elect Donald Trump’s Bitcoin policies. With investors expressing confidence in the US dollar’s strength, it is unlikely that the Trump administration would adopt a Bitcoin strategic reserve to protect US dollar dominance. This trend suggests that the future of crypto may depend on how the global investment community perceives the US economy and dollar.
Sources
- TradingView: Dollar Strength Index
- Chainalysis: Stablecoin Adoption in Latin America
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- "US Government Will Not Buy Bitcoin in 2025 — Galaxy Research"
- "Overcollateralized Stablecoins Extending US Dollar Dominance"
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