Crypto has many problems of its own making. Bad user experiences, unsustainable transaction fees, an . But until this year, I doubt anyone would have suggested that an interdependence on the U.S. dollar was one of them.
The introduction of easily tradable, even decentralized, stablecoins has been a godsend for millions of ordinary people. They can now hedge against the constant fluctuations in price of ETH and BTC. And price stability means global commerce need no longer be obviously deterred in integrating programmable money into their digital operations.
And yet, the land of the dollar is in trouble. The full economic repercussions of shutting down an economy for many months are yet to reach its apex. Debt is being monetized on a huge scale. There are huge wealth divides between generations, races and cities.
Cultural and political divides run equally as deep. The U.S. population that even mask wearing is party-political. And at the top, the country is led by administration intent on stoking more division and taking sides. U.S. politics is so broken, it is not beyond comprehension that full blown civil strife could break out. In fact, it is something that U.S. and have openly contemplated in trepidation of the possibility.
And if America is so precariously balanced between further prosperity and potential disaster, so too rests the fate of the U.S. dollar for the rest of the world. Just the issue of U.S. Treasury debt issuance alone has had professional money managers this month that the U.S.’s reserve currency status is under threat.
Traditional markets have mature financial products to hedge or flee such tectonic shifts. There are plenty of other world currencies or other non-USD denominated assets to transfer funds into should the dollar take a serious tumble.
Crypto lacks those same products, what an economist or trader might coldly describe as “financial instruments to hedge against external political risks”. Despite Web 3.0’s aim to be both global in reach, and also free of the control of nation states, its fate is still incredibly tied to USD.