Dollar in Decline: Watch Bitcoin and Gold!

It says a lot about investor sentiment when the U.S. dollar is in a state of free fall. International capital is flowing out of government-reliant assets with huge counterparty risk — including the dollar and bonds, which are supposed to be “risk-free.”

If the dollar represents certainty and confidence in the U.S. government and financial system, then the world is submitting a clear “no” vote in 2025. Just recently, the International Monetary Fund (IMF) cut its GDP growth forecasts for both 2025 and 2026, with the IMF’s biggest cuts being reserved for the U.S. economy.

Certainly, the latest round of data isn’t helping investors through this period of indecision. Shockingly, the Philadelphia Fed Non-Manufacturing Survey tumbled from -32.5 in March to -42.7 in April; meanwhile, the Richmond Fed’s Manufacturing Activity survey slumped to -13, falling far short of the -7 print that economists had expected.

Paul Atkins did get sworn in as the nation’s SEC Chairman, which might have reduced a little bit of that uncertain feeling in the financial markets. Yet, investors and strategists still can’t seem to agree on their outlook for the future; this helps to explain why major U.S. stock market indexes are cratering one day, then soaring the next day.

The public wants clarity, but achieving balanced trade isn’t something that happens in a day or a month. Treasury Secretary Scott Bessent tried to explain that final trade deals are complicated and could take months to hammer out, but evidently, short-term stock and currency traders just don’t have the patience to wait that long.

Courtesy: @ISABELNET_SA

 
Graham Summers of Phoenix Capital Research understands that an incipient currency crisis can have major consequences, even before this year is over. He observes that America’s debt-to-GDP ratio currently stands at an eye-watering 120%.

Moreover, the U.S. will need to roll over roughly $9 trillion worth of debt in the next 12 months. This could be problematic or simply impossible if global investors are fleeing the dollar and capital is flowing out of the country at breakneck speed.

Thankfully, the dollar isn’t the only form of money and it appears that the current presidential administration recognizes this. Never before have we witnessed a U.S. President who acknowledges both gold and Bitcoin as real and valuable.

In other words, we’re all bearing witness to historic change, and this will involve some growing pains, especially for investors who stubbornly cling to traditional values. This is a non-traditional White House that’s trying new approaches, and investors need to adapt sooner rather than later.

Courtesy: @Barchart

They’ll also have to get used to friction between the White House and the Federal Reserve. It’s unusual to witness a President who speaks his mind regarding central bank policy, and the financial markets are having a tough time adapting to this level of transparency.

With the dollar in free-fall mode, traditional analysts are stunned to see gold’s strength, but really they shouldn’t be. It was just a matter of time before the dollar reverted to the mean and gold broke out of its years-long range.

Keep your eye on gold, but also keep tabs on Bitcoin as it’s also reacting to the world’s move toward de-dollarization. The pundits will remind you that Bitcoin is considered a risk-on asset like the NASDAQ, and that’s true to a certain extent.

However, Bitcoin is also a dollar alternative. This is a characteristic that Bitcoin shares with gold, and some investors keep both assets in their portfolios as they grab some popcorn and watch the dollar deteriorate from afar.

Yet, it’s also fine to keep some fiat currency as “dry powder” for buying opportunities. The market’s discomfort with rapid changes could bring you low prices in high-conviction assets soon, and this will put you at a fork in the road: Will you just watch it all happen, or will you seize the moment for a lifetime of wealth?