Bitcoin might play an even larger part in the international board, as the superpowers battle for financial dominance. As the U.S. Federal Reserve tightens and Europe is under the threat of war, the benchmark cryptocurrency has experienced some relief.
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Bitcoin is trading at $40,000. There has been a 1% gain over the last day, and a loss of 3% in the week.
As Gold Rises, So Will Bitcoin…
Arthur Hayes (BitMEX co-founder) has posted a forecast for Bitcoin’s future and made a declaration that may have global implications: The financial system built on oil and money is over.
Otherwise known as “Petrodollars”, the term describes the way our current financial ecosystem is supported by the exchange of the U.S. dollar for this commodity, the world’s main source of energy. The currency is accepted almost exclusively by the big oil companies for products.
It is a key player in the global financial system. A major part of this system is also the Society for Worldwide Interbank Financial Telecommunications. Bitcoin can be seen as a threat and direct competitor to the status quo by some.
In his essay, titled “Energy Cancelled”, Hayes claims the Petrodollar system came to an end. After the Russian military invaded Ukraine, sanctions were imposed by the international community on the Vladimir Putin-led nation.
Russian banks and a portion of the country’s fiat currency reserve were seized by the U.S. and European Union (EU). Russia and China have been trying to challenge the dominance of U.S. dollar on the international stage and are now looking for alternatives.
8/12 Add in the fact that Saudi Arabia may accept a number of foreigners #YuanYou can now use Dollars instead for Chinese oil to create an acceleration for economic uncertainty and more problems. https://t.co/5by5PkH8Vf
— Material Indicators (@MI_Algos) March 16, 2022
Hayes believes this new system is yet to be named but could potentially be supported by a “neutral” medium of exchanges, such as Gold. Hayes indicated that Bitcoin would be directly affected by this.
To facilitate international trade in food and energy, a new neutral reserve asset will be created, I think it will be gold. From a philosophical standpoint, central banks and sovereigns appreciate the value of gold, but not that of Bitcoin (…). Bitcoin has only been in existence for two decades. But don’t worry: as gold succeeds so will Bitcoin.
Bitcoin will be a benefit because money has changed forever.
Hayes then breaks down the development of money and its network supporting it from its physical phase through its digital phase. Individuals, small entities and countries can have their money stored in centralized permissioned networks. If a government or bank decides otherwise, they could be locked out.
The U.S., E.U. will block access to participants from the network if the countries that dominate it are not allowed. Questions about the status-quo arise if China, for example, blocks network access to participants.
Russia’s recent sanctions, the essay claims, is a one-of-a-kind case in history. The digitalization of the monetary network has made it possible to “cancel”, to “shun”, the country at this scale. Hayes said:
Money can be used as an energy storage medium, although the biggest energy producers worldwide are not the users of the most popular monetary instruments. Why should any central bank “save” in any Western fiat currency, when their savings can be expropriated arbitrarily and unilaterally by the operators of the digital fiat monetary networks?
Hayes shared data that estimated current savings at $12 trillion. Most countries keep these funds in a network managed by superpowers. Hayes predicts that these funds would be transferred to another network.
Gold could be the direct beneficiary. As mentioned above, China and other nations may begin to put buying pressure on the Gold spot market. Long Gold could be this decade’s most important trade. Other commodities, such as wheat, could soon follow.
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Hayes anticipates Gold reaching $10,000 per spot over the long-term. Bitcoin and all other hard money assets will benefit from the rising popularity of this precious metal. With Gold moving up, cryptocurrency could reach $1,000,000 per coin. Hayes also added:
(…) any and all hard monetary assets believed to protect portfolios from this pestilence will get bid to astronomical levels. That mental shift is what breaks the link between Bitcoin and other traditional risk-on/off assets like US equities or nominal interest rate.