Bitcoin vs. Dollar Supremacy: Can Bitcoin Coexist with the Dollar's Dominance Under Trump's Administration?

While Trump has championed favorable crypto initiatives, including the idea of a national Bitcoin reserve, industry leaders remain cautious about the feasibility of such promises.

Despite Trump's support for crypto-friendly initiatives, such as the concept of a national Bitcoin reserve, industry leaders remain skeptical about the practicality of such promises.

Bitcoin vs. Dollar Supremacy

According to Ki Young Ju, CEO of CryptoQuant, the U.S. government's stance on Bitcoin is closely linked to the country's dollar supremacy. He explains that Bitcoin, which is often referred to as “digital gold,” tends to perform well during periods of economic distress. For decades, the price of gold would increase whenever there was a perceived threat to the U.S. economy. However, in recent times, Bitcoin has been touted as a hedge against both inflation and financial collapse.

Source:X

However, Ju notes that as long as the U.S. dollar continues to be a global safe-haven asset, Bitcoin's potential use as a strategic reserve asset will remain limited.

He adds: “In emerging markets where local currencies are rapidly losing value, people still prefer U.S. dollars over Bitcoin or gold.”

The Political Discourse Behind Pro-Bitcoin Policies

Trump's campaign included promises to adopt Bitcoin as a strategic reserve as a way to modernize U.S. monetary policy. But analysts like Ju believe that these promises may be more about politics than genuine conviction.

After all, Trump's rhetoric seemed to place a strong emphasis on U.S. economic dominance, which could potentially clash with the promotion of a decentralized asset that is widely seen as threatening the dollar's primacy.

Ju believes that it would be easier for Trump to change his mind and ultimately reverse his pro-Bitcoin agenda if it were to pose a threat to U.S. leverage. “If the administration decides to prioritize shoring up dollar dominance, then we may see Bitcoin-friendly policies taking a backseat.”

Stablecoins: Expanding Dollar Dominance

While Bitcoin may encounter resistance, dollar-pegged stablecoins are becoming increasingly prominent as a bridge between traditional finance and blockchain technology. Recently, Paxos CEO Charles Cascarilla highlighted the role of stablecoins in maintaining the usefulness of the U.S. dollar. At a global conference, Cascarilla stated, “Stablecoins essentially bring the speed and connectivity of the internet to fiat currencies, making them indispensable in the blockchain economy.”

The Dollar Strength Index (DXY) showcases the steady rise of the U.S. dollar since October 2024. Source:TradingView

Stablecoins are especially in demand in countries that are experiencing hyperinflation, such as Turkey, where the inflation rate for the lira reached 67% in March 2024. According to Chainalysis, over half of the digital assets traded in Latin America were stablecoins, reflecting the increasing participation in global financial ecosystems.

Uncertain Prospects for Bitcoin Policies

Although Trump's pro-Bitcoin statements have resonated with crypto proponents, experts caution against excessive optimism. Alex Thorn, head of research at Galaxy Digital, noted that while the U.S. government may explore reserve strategies related to Bitcoin, it is unlikely to engage in large-scale acquisitions.

Ju concludes that unless the U.S. perceives a critical threat to its economic dominance, Bitcoin will likely remain on the periphery of national monetary policy. “Trump's bold statements at the National Bitcoin Conference might be better understood as a political maneuver rather than a definitive policy direction,” he observes.

As the world continues to witness the interplay between Bitcoin and the U.S. dollar, the question remains: Can Bitcoin coexist with—or challenge—the dollar's supremacy under Trump's administration? For now, the answer is closely tied to the evolving dynamics of global finance.