Nick Chong · 4 days ago · 2 min read
German-Finnish Internet entrepreneur Kim Dotcom recently reaffirmed his negative stance on the US dollar and stated that crypto will eventually compete with reserve currencies.
“Many economists agree. The US economy and US dollar will collapse under the enormous US debt burden. The pyramid game is coming to an end. Crypto and precious metals will go up when everything else falls. I think it’s going to happen in the next 2 years.”
Is an Epic Collapse Coming?
In an interview with Washington Post, Irwin M. Stelzer of the Hudson Institute said that if the US continues to go down the path of acquiring limitless debt and printing trillions of dollars on a yearly basis, the economy of arguably the most powerful country in the world could collapse. Stelzer said,
“If unlimited borrowing, financed by printing money, were a path to prosperity, then Venezuela and Zimbabwe would be top of the growth tables.”
Citing the statement of Stelzer, Dotcom said that the growing debt piled on by the US government will inevitably create a bubble, similar to the financial crisis in 2008, leading the value of the US dollar to drop substantially.
If the US dollar falls, Dotcom said that the value of stores of value such as gold and crypto with independent price movements will prosper.
In an interview with Bloomberg, Matt Hougan, the vice president of research and development at Bitwise Asset Management, recently explained that cryptocurrencies as an asset class rely on fundamental drivers that are different from the catalysts of the broader financial market.
Hougan said that institutional investors and large-scale retail traders have begun to acknowledge cryptocurrencies as a legitimate store of value because the entire asset class moves independently of the traditional finance sector and the global economy.
Hence, assets like gold and crypto, which are known to be robust stores of value, will remain unaffected by the next financial crisis, if it occurs in the near future as economists predict. Matt said,
“Non-correlation is not the same as inverse correlation so there’s no guarantee that when the market goes down crypto will go up. Over the long term, we think the fundamental drivers of crypto are different from the fundamental driver of equities and other assets, and we would expect the low correlation to persist.”
In recent years, a growing number of economists have publicly disclosed their concerns regarding the performance of the global financial market and the growing debt count of major economies like the US.
While the value of fiat money such as the US dollar is a direct representation of the power a central authority holds, and the value of the US dollar will not decline substantially as long as the US government holds its authority over the global economy, economists have said that if the US government continues to drive its debt up unnecessarily, it will reflect on the economy in the years to come.
Record $13 Trillion Debt
Earlier this year, the Federal Reserve Bank of New York’s Center for Microeconomic Data report revealed that the total US household debt has reached $13 trillion, establishing a new all-time high.
Mortgage debt, credit card debt, and student loans increased by around 70-fold on average, demonstrating instability in the economy of the US.
Analysts have suggested that as economists and investors continue to express their concerns regarding the increasing debt of the US, more individual and institutional investors will likely move to gold and crypto to hedge against the global economy.