The Trump administration hopes for a significant devaluation of the dollar, which is beneficial for Bitcoin.

Author: Matt Hougan, Chief Investment Officer of Bitwise

Translation: AIMan@Golden Finance

The Trump administration desires a devaluation of the dollar, even if it means ending the dollar's status as the world's reserve currency. This has certain implications for Bitcoin.

Being an investor in times like these is not easy. The market is highly volatile, and news is constantly flowing in.

Is Trump's tariff policy a negotiation strategy, or will it become a long-term measure? Can we really expect a 90-day tariff suspension? Financial media is filled with bold opinions from market experts. While browsing X (formerly Twitter), you might see various differing views from people like Cliff Asness of AQR Capital Management ("Tariff policy is terrible"), Bill Ackman of Pershing Square Capital Management ("The tariffs themselves are not the problem, but they are poorly designed"), or Anthony Pompliano of Professional Capital ("Tariffs could be beneficial"). It's hard to know whom to believe.

My strategy for dealing with market chaos is to narrow my focus. I don't try to speculate on all the possible outcomes; instead, I try to concentrate on a few things that I am certain will happen.

So, when it comes to tariff measures, the one thing I am most certain about is: the Trump administration wants a significant devaluation of the dollar, even if it means sacrificing the dollar's status as the world's sole reserve currency.

This has a major impact on Bitcoin.

The most important thing you need to read today

The most important thing I read on Monday was a speech by Steve Moore, Chairman of the White House Council of Economic Advisers. This speech was released by the White House just as the tariff dispute was reaching a boiling point. I believe this is not a coincidence.

I want to quote a large portion of this speech because I think it is really important:

The reserve function of the dollar has caused long-term monetary distortions and, combined with unfair trade barriers set by other countries, has led to unsustainable trade deficits. These trade deficits have severely harmed our manufacturing sector and many working-class families and their communities, all for the convenience of trade among non-Americans.

…Admittedly, the demand for the dollar keeps our borrowing rates low, but it also keeps the currency market in a state of distortion. This process has placed a heavy burden on our businesses and workers, making their products and labor uncompetitive on the global stage, with the manufacturing workforce having decreased by more than a third since its peak, while our share of global manufacturing output has also dropped by 40%.

The implicit message is clear: the dollar needs to be devalued.

What does this mean for Bitcoin?

This insight has both short-term and long-term implications for Bitcoin.

In the short term, I expect a weaker dollar to be beneficial for Bitcoin. Over the past five years, the correlation between Bitcoin and the Dollar Index (DXY, a measure that compares the dollar's value against a basket of six major currencies) has ranged from -0.4 to -0.8. When the dollar falls, Bitcoin tends to rise. I expect this trend to continue.

In the long term, the impact is even more positive. The turmoil in the global macro system creates opportunities for the emergence of new reserve assets. This makes sense: countries and businesses choose the dollar for international trade because of its stability. When that stability is called into question, they have to look for alternatives.

I believe we will transition from a single reserve currency (the dollar) system to a more fragmented reserve system, where hard currencies like Bitcoin and gold will play a larger role than they do now. In this scenario, the rationale for choosing Bitcoin is simple: when international tensions rise and the global monetary system is in turmoil, where else can investors turn to find a scarce, global, digital store of value that is not controlled by any government or entity?

As the old saying goes: "Chaos is the ladder of progress."

In December 2024, Bitwise predicts that Bitcoin's price will reach $200,000 by the end of this year. I still believe this is achievable.

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