As commodity prices soar and equities tumble in the wake of Russia’s war on Ukraine, the monetary system could be drastically changed, some analysts say.
At some point in the future, digital tokens may revert to inflation hedging and fiat turmoil protection as intended when they were created. Traditional safe havens like gold, US Treasuries and the US dollar have surged in the current risk aversion environment.
In a recent analysis, Zoltan Pozsar, Global Head of Short-Term Interest Strategy at Credit Suisse, said the crisis-level slump could eventually benefit Bitcoin after the current market chaos subsides.
“We are witnessing the birth of Bretton Woods III – a new world (monetary) order centered on commodity-based currencies in the East that will likely weaken the Eurodollar system and also contribute to inflationary forces in the West. “, wrote Pozsar in a research. Remark.
Amid the unfolding crisis, Pozsar added that the turmoil — partly inspired by punitive Western sanctions against Russia — is boosting the “appeal” of other forms of currency, the analyst noted.
“Bretton Woods II was built on internal money, and its foundations crumbled a week ago when the G7 seized Russia’s foreign exchange reserves,” he added.
Digital tokens and crypto-related stocks have largely tracked equity risk appetite. Crypto-related names like Microstrategy (MSTR) (-7.6%), Coinbase (COIN) (-17%) and Marathon (MARA) (-14%) continue to sell off against BTC.
Changing just below $39,000 on Tuesday, Bitcoin (BTC-USD) is down 13% over the past week, but traded flat on the day. The global cryptocurrency market capitalization lost $4.3 billion overnight and sits at $1.74 trillion according to asset research firm, Fundstrat.
The second-largest cryptocurrency, Ether (ETH-USD) sold 2% for the same period, down from nearly a 15% loss over the past week. Its 24-hour put/call ratio hit a 5-month high, according to Coinbase Skew, signaling that bearish investors are emboldened.
Still, BTC is doing better than most other digital coins, even though the narrative of it being a haven has been put to rest by recent price action. In the long run, this could prove better than most, Pozsar argued, since the punitive sanctions made a more decentralized system of financial transactions more attractive.
“This crisis is unlike anything we’ve seen since President Nixon pulled gold out of the US dollar in 1971 – the end of the era of commodity-based money,” the economist said. . And when the Russian-Ukrainian conflict ends, the analyst called for a “much weaker” US dollar – and a stronger Chinese renminbi – backed by a basket of commodities.
“‘Money’ will never be the same again,” Pozsar wrote, “and Bitcoin (if it still exists then) will likely benefit from it all.”
Marko Papic, chief strategist at alternative assets platform Clocktower Group, pointed out in a research note that predictions that the US dollar would lose its rank as the world’s reserve currency following the fallout from Russian sanctions were “overblown. “.
However, he indicated that a more polarized monetary order in global trade “will likely have a multipolar foreign exchange reserve menu,” meaning the value of currencies will change.
Still, Jon Wolfenbarger, CEO and founder of private investment research platform Bull and Bear Profits, told Yahoo Finance that “Bitcoin would potentially benefit from a weaker US dollar and a stronger Chinese currency. supported by commodities” as investors looked for alternatives.
If sanctions on aggressive Russian banks create a big enough shock to commodity supply, Western investors could decide to shift their assets from the safety of the US dollar to an alternative store of value, he argued. .
“Assuming governments don’t ban it, Bitcoin is a great alternative with less political risk,” Wolfenbarger added.
David Hollerith covers cryptocurrency for Yahoo Finance. follow him @dshollers.
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