07/16 update below. This post was originally published on July 14
U.S. Treasury secretary Janet Yellen has warned countries around the world are moving away from the U.S. dollar—as the spiraling $34 trillion U.S. debt pile fuels fears of collapse—with bitcoin and crypto slowly chipping away at dollar dominance.
The bitcoin price has rocketed over the last year, climbing despite a “critical” Federal Reserve warning, and helped by bettors who are increasingly confident former U.S. president Donald Trump will retake the White House in November.
Now, as the radical Project 2025 policy plan puts bitcoin on a collision course with gold, Yellen has said she fears U.S. financial sanctions will reduce the role of the dollar around the world, as Russia encourages the use of bitcoin and crypto.
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US Treasury secretary Janet Yellen has warned U.S. dollar dominance will continue to decline as … [+]
“We have very powerful sanctions that are available because of the important role of the dollar in international transactions,” Yellen told U.S. lawmakers on the House financial services committee this week.
“The more we have used sanctions, the more countries look for ways to engage in financial transactions that don’t involve the dollar.”
07/16 update: BlackRock chief executive Larry Fink, whose crypto conversion last year was the spear tip in the successful campaign to bring bitcoin spot exchange-traded funds (ETFs) to Wall Street, has warned over the pace that the U.S. debt pile is growing.
“We’re putting a real burden on our children of this massive spend that we can’t afford,” Fink told CNBC, calling for the U.S. and countries around the world to go for economic growth. “The U.S. deficit is the largest in the world, growing at the fastest rate in the world and we need to be finding ways of minimizing the role of the deficit on the economy. The public deficits are just growing too fast as a percentage of GDP.”
Earlier this year, Bank of America analysts warned the U.S. debt load is about to ramp up to add $1 trillion every 100 days—fueling a bitcoin price surge.
“The U.S. national debt is rising by $1 trillion every 100 days,” Michael Hartnett, chief strategist of Bank of America, wrote in a note to clients, adding it’s “little wonder ‘debt debasement’ trades [are] closing in on all-time highs.”
Last month, analysts at BlackRock, the world’s largest asset manager, warned an “unprecedented” scenario is unfolding that could hit the bitcoin price and crypto market as the Federal Reserve and central banks “are forced to keep interest rates higher than pre-pandemic to tackle persistent inflationary pressures.”
Fink also admitted he was wrong about bitcoin and called it a “legitimate” financial instrument after branding bitcoin “an index of money laundering” in 2017.
“It is a legitimate financial instrument that allows you to maybe have uncorrelated type of returns,” Fink told CNBC. “I believe it is an instrument that you invest in when you’re more frightened, though. It is an instrument when you believe countries are debasing their currency by excess deficits, and some countries are.”
BlackRock’s embrace of bitcoin is widely credited with powering the bitcoin price and crypto market rebound over the last year, with a fleet of spot bitcoin ETFs exploding onto Wall Street in January and led by BlackRock’s IBIT bitcoin fund.
The U.S. has targeted Russia and Iran with strict financial sanctions in recent years, leading to accusations it’s weaponizing the dollar and pushing the so-called Brics group of up-and-coming countries away from the western financial system.
The Brics, initially made up of Brazil, Russia, India and China before being joined by South Africa and then Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates (UAE
iShares MSCI UAE Capped ETF
The U.S.-led western financial sanctions “will have a certain impact on the international status of the U.S. dollar,” Zhao Qingming, a Beijing-based financial expert told the China newspaper Global Times. “In the short term, the position of the U.S. dollar should remain stable, but over time, its position may weaken.”
Earlier this month, Russia’s central bank encouraged the use of bitcoin and crypto to counter Western sanctions imposed over the Ukraine conflict.
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The bitcoin price has swung wildly in recent years, rebounding as fears swirl over the future of the … [+]
“New financial technology creates opportunities for schemes which did not exist before. This is why we softened our stance on the use of cryptocurrencies in international payments, allowing the use of digital assets in such payments,” Elvira Nabiullina, governor of Russia’s central bank, reportedly told a financial conference in St.Petersburg.
Fresh fears of U.S. dollar collapse come as some bitcoin and crypto traders bet the bitcoin price will soar to an all-time high ahead of the U.S. election in November.
In a July 2 note seen by The Block, Standard Chartered’s head of forex and crypto research Geoffrey Kendrick predicted “a fresh all-time high for bitcoin in August is likely, then $100,000 by U.S. election day,” adding: “The logic here is that both regulation and mining would be looked at more favourably under Trump.”
Kendrick said he expects to see the bitcoin price reach $150,000 by the end of 2024 and hit $200,000 before the end of 2025—which would give bitcoin a market capitalization of around $4 trillion.
Trump has emerged as the preferred candidate for the bitcoin and crypto community— promising to protect people’s right to hold bitcoin and being announced as a headline speaker at the Bitcoin 2024 conference later this month—putting him starkly at odds with the Biden administration’s anti-crypto stance.
