US Dollar Decline - Doomed Currency?

Is the US Dollar doomed to fail soon? This is a question that probably many of you, including myself, are asking right now. The short answer is probably yes but the better question would be, why and when? In this article I want to discuss the current situation regarding the US dollar, potential alternatives and what it means for investors.

Dollar On The Decline?

Since the war between Russia and Ukraine started, a lot of things have happened, including heavy sanctions on the Russian Federation. These sanctions included a seizure of all Russian wealth outside of Russia and a ban from the SWIFT system. These sanction showed how the US Dollar can easily be weaponized and have major implications on a countries economy. Since around 60% of the global trade is don in US Dollars this gives the US a big power shift. Obviously, this benefits the US, as it allows them to finance their operations by selling debt to foreign countries which is possible because of the constant demand for the US Dollar.

The problem with these actions is that they created a big incentive for other countries to look for a dollar alternative in order to be less affected by potential sanctions. One of the alternatives that is being considered is the Chinese Yuan as China seems to be the next big economy on the raise. With that being said, the trend away from the dollar has been taken place for quite a while now, but is another fiat currency really the right solution? It feels like just kicking the can down the road, especially with the knowledge that China is not the easiest to deal with. Furthermore, I do not think that the Dollar will be replaced in the next decade but like I mentioned before, a clear trend can be seen.

With that being said, another potential solution would certainly be crypto currencies. A possible decentralized solution should allow the countries to be more independent and not be afraid of possible sanctions. Moreover, the beauty of a potential Bitcoin system would be that these big trades do not happen on a daily basis which the Bitcoin network should be able to handle and with its decentralized nature it would be the next logical choice, right?

Crypto Consideration

On this regard, there are currently different approaches. On the one side we have Russia for example that is trying to ban any kind of crypto currency activities while on the other side Ukraine just passed a law that makes it more easy to adopt crypto in the future. The European Union just voted against a Proof of Work crypto currency ban, but are trying to ban the DeFi actions with a “Travel Rule”. Furthermore, we have the Latin American countries that are trying everything they can to adopt crypto currencies in the face of an increasingly inflationary US dollar. One of the latest example sis Guatemala which is trying to follow the footsteps of El Savador.

Conclusion

I think that we are close to witness the next country to make Bitcoin legal tender. This would be certainly great news for the whole crypto community and would show the world that it should consider Bitcoin as a real alternative. Regarding the decline of the dollar, I think that this will not happen over night. Like I mentioned we are already witnessing the decline and it will probably take another decade or two until the dollar will be replaced by a stronger reserve currency. With that being said, let’s hope it will not be another fiat currency.