Bitcoin is being more and more seen, especially as a strategic hedge against the craziness of all fiat currencies. Keiser thinks bitcoin is in the process of changing its function. Its transformation from a speculative asset to a focal point of protection against sovereign default and currency devaluation. He notes how stablecoins essentially double the M2 money supply, adding to the instability of the existing financial system.
In terms of the overall “$400 trillion global fiat money scheme,” Keiser compares Bitcoin to a Credit Default Swap (CDS). He contends that this deal is falling apart as appetite for U.S. Treasuries dries up. This point of view is representative of a broader investor sentiment. Many are looking there to diversify into assets that don’t highly correlate with traditional markets.
Keiser’s thesis raises important issues about the dollar’s waning purchasing power. When he says its value could drop by 50 percent, investors flee to hedging options against inflation and currency devaluation. Given the backdrop of such scenarios, Bitcoin’s decentralized nature and a fixed capped supply make it an alluring alternative.
The dollar’s expected erosion of purchasing power is one of the most important factors spurring interest in alternative assets. Investors have never been more focused on protecting their wealth in an immediate shifting landscape where currencies seem likely to be eliminated or at least devalued dramatically. Bitcoin’s predictable and fixed supply of 21 million coins provides a hedge against the inflationary policies adopted by central banks.
In other words, stablecoins implicitly double the already inflated M2 money supply. As such, the widespread extension of such lending creates serious concerns about the real‐world stability of our financial system. Stablecoins are cryptocurrencies that are pegged to stable assets, like the U.S. dollar. First, they can, at times, dramatically amplify the effects of monetary policy and possibly worsen systemic risk.
The change in how Bitcoin is perceived is indicative of a broader realization that fiat currencies are inherently limited, flawed and fragile. As governments around the world grapple with debt and economic uncertainty, investors are seeking alternatives that offer greater security and independence.
