‘Worse Than 1971’—U.S. Dollar Price ‘Collapse’ Predicted To Ignite $22 Trillion Bitcoin Ch
April 12, 2025
04/12 update below. This post was originally published on April 11
Bitcoin has swung wildly over the last week as traders ride U.S. president Donald Trump’s tariff rollercoaster (with Michael Saylor’s Strategy issuing a shock warning).
The bitcoin price is holding up following the latest tariff shots fired by Trump and China after plunging along with stock markets in early April—even as Wall Street grapples with a looming “existential threat” from crypto.
Now, while traders bet on a Federal Reserve game-changer, the bitcoin price is braced for a dollar “confidence crisis” as the ICE U.S. dollar index plummets to its worst day since 2022.
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“The question of a potential dollar confidence crisis has now been definitively answered—we are experiencing one in full force,” ING analysts including Francesco Pesole wrote in a note seen by Bloomberg. “The dollar collapse is working as a barometer of ‘sell America’ at the moment.”
The escalating Trump-led global trade war saw the ICE U.S. Dollar Index, which measures the U.S. dollar against a basket of global currencies, fall sharply this week, dropping under the 100 level and putting it on course to return to its 2022 range.
04/12 update: The U.S. dollar has fallen to its lowest level in three years as U.S. president Donald Trump’s hot-and-cold approach to global tariffs drives extreme volatility on U.S. financial markets.
“What we are going through now is worse than when former President Nixon took us off the gold standard in August 1971,” Marc Chandler, the New York-based chief market strategist for Bannockburn Global Forex, told MarketWatch. “The biggest damage right now is to the U.S. brand.”
Meanwhile, the chaos and uncertainty of the escalating tariff war could help bitcoin close the gap on gold’s $22 trillion market capitalization, according to a report from bitcoin and crypto asset manager Grayscale.
“In our view, disruptions to the dollar-centric international trade and financial system could result in more reserve diversification by central banks, including into bitcoin,” Grayscale analysts wrote.
“Bitcoin is too young for us to know how it would have behaved in past episodes, but historical data shows that stagflation tends to be negative for traditional asset returns and favorable for scarce commodities like gold,” the researchers wrote, adding that during the 1970s, “the price of gold appreciated at an annualized rate of about 30%, significantly above the rate of inflation.”
Bitcoin, sometimes called digital gold due to its scarcity, has so far failed to follow gold higher as traders panic-sell assets in the face of a looming global trade war, with the gold price hitting a record, all-time high this week.
“The market is re-assessing the structural attractiveness of the dollar as the world’s global reserve currency and is undergoing a process of rapid de-dollarisation,” Deutsche Bank’s global head of FX research George Saravelos wrote in a note seen by City AM.
The dollar’s decline is seen by some as boosting the bitcoin price as traders bet bitcoin will follow in gold’s footsteps, performing as a safe haven asset.
“Like a rising tide, the dollar’s decline is lifting other assets,” Alex Kuptsikevich, the FxPro chief market analyst, said in emailed comments, adding “a falling dollar supports cryptocurrencies.”
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“Bitcoin’s correlation with U.S. equities may have garnered excessive attention, while its ties to Federal Reserve policy and the U.S. dollar’s trajectory deserve greater scrutiny,” LMax Group’s market strategist Joel Kruger said via email.
Trump has been pushing Fed chair Jerome Powell to cut interest rates as he embarks on his global trade war, fuelling expectations the Fed could be forced to cut interest rates through 2025, either in response to a tariff-led economic slow down or because Trump has fired Powell.
“Market dynamics are shifting as the Fed’s outlook adjusts to pressures from U.S. trade policy, with expectations of steeper rate cuts in 2025 now taking hold. This pivot toward a more accommodative stance is poised to narrow yield differentials, weakening the dollar’s appeal and, in turn, creating a supportive tailwind for bitcoin,” Kruger said.
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