It was just about two weeks ago that I saw in my Twitter/X feed that Bitcoin had hit a new all-time high in terms of the Japanese yen, Argentine peso, and Philippine peso.

What better way to generate exhilaration in your followers than by showing off charts of Bitcoin reaching unprecedented levels?

By simply glancing at a chart of the Japanese yen or Argentine peso against BTC, you would intuitively think that Bitcoin is hitting new all-time highs worldwide, and might allow yourself to become overwhelmed with excitement.

But upon closer examination, we realize that Bitcoin is not actually hitting all-time highs in terms of actual purchasing power, but rather these fiat currencies are simply falling in value relative to the US dollar, creating the illusion that Bitcoin is breaking records.

The Dollar's Relative Strength

The reality is that the US dollar is performing better compared to these other national currencies, which is causing their BTC price charts to spike. The USD still remains the "cleanest shirt in the dirty laundry basket", as they say. But why?

Despite many economists thinking it was an impossibility, the Federal Reserve has managed to raise interest rates from zero to 5.25%. Quite impressive, considering they must pay interest on close to $35 trillion dollars of debt now.

What effect does increasing the interest rate have?

As interest rates rise, the cost of borrowing increases, and that causes the money supply to decrease (although this is hard to measure considering the shadow banking system, and the general opacity of the traditional financial world). Dollars then become more valuable, because there are fewer in circulation.

We must also be cognizant of the fact that the US dollar is still the world reserve currency (although its status has been waning), and many foreign debts need to be serviced in US dollars, causing it to remain strong.

The DYX, which measures the dollar's strength relative to other national currencies, has only dropped slightly since it crossed 110 in 2022.

Fiat Dominoes

What should really be setting off alarm bells in our heads after seeing these Bitcoin all-time high charts is how rapidly other fiat currencies are losing value relative to the US dollar.

We can safely say that inflation is already bad in America. As foreign businesses sell their local currencies to get dollars to pay their debts, the value of those local currencies decreases, and it causes the cost of living to rise even more in non-dollarized economies.

If America can keep their interest rates over 5% (or raise them even further), this will likely cause foreign currencies to drop even more in value, especially relative to cryptocurrencies.

Due to this phenomenon, we could see the Yen or the Euro collapse in value before the dollar, which could be the the last domino to fall. I think, more likely, we will see a coordinated effort to drop traditional fiat currencies everywhere in favor of CBDCs.

Inevitable Crypto ATHs

When the fiat dominoes do fall, cryptocurrencies will probably suffer a sharp correction as the panic sets it. That said, as time goes on and the people realize crypto's merits (transparent total supplies and immutability, for example), they will once again surpass their all-time highs compared to fiat.

If you learned something new from this article, be sure to check out my other posts on crypto and finance here on the HIVE blockchain. You can also follow me on InLeo for more frequent updates.

Until next time...

Resources

Trading View YENJPY Image [1]
US Dollar Index Chart [2]
Cointelegraph Tweet [3]