Title: Monthly Outlook: Dethroning the Dollar
Author: David Duong, CFA - Global Head of Research
Translated by: Daisy, ChainCatcher
Editor's Note:
This article is compiled from Coinbase's latest monthly outlook research report. The report points out that as the U.S. "twin deficits" continue to expand and trade protectionism intensifies, market confidence in the dollar is continuously weakening, and the world may be facing a large-scale asset portfolio restructuring. In this context, Bitcoin, with its sovereign neutrality and lack of capital controls, is increasingly viewed by many countries as a potential supranational reserve asset. According to the report's conservative estimate, if the global reserve system gradually incorporates Bitcoin, its total market value could potentially increase by approximately $1.2 trillion.
The following is a translation and compilation of the report's key points.
Summary
Global capital flows are being reshaped due to intensifying trade protectionism, and the dollar's dominance as a global reserve currency is being challenged. As the U.S. fiscal and trade deficits continue to expand, debt levels are becoming unsustainable, and market confidence in the dollar as a safe-haven asset is wavering. This trend could lead to a reversal of dollar capital inflows, prompting global large institutions to readjust asset allocations, and in the long term, the dollar may face continuous and significant selling pressure.
Notably, we believe that the volatility of the past few months has further accelerated the decade-long decline of dollar dominance. The upcoming changes could become a critical turning point for Bitcoin and the entire crypto market. The current changes in the dollar system make assets like gold and Bitcoin more attractive alternatives in the emerging monetary landscape. The Basel III Accord's upgrade of gold from a Tier 3 to a Tier 1 asset is a typical example. Especially Bitcoin, with its sovereign neutrality and immunity to sanctions and capital controls, is poised to become a viable supranational unit of account in international trade.
We believe that the decline in dollar demand may prompt more countries to advance international reserve diversification. Based on conservative estimates, this trend could bring about a $1.2 trillion increase in Bitcoin's market value. This partly explains why more countries are beginning to focus on strategic Bitcoin reserves, further highlighting Bitcoin's growing importance in geopolitics.
[The translation continues in the same manner for the rest of the text, maintaining the original formatting and translating all non-tagged text to English.]For this reason, we view Bitcoin as a supranational store of value asset and believe it has unique advantages in establishing monetary credit for international trade. Currently, over 80% of global international trade is still settled in US dollars (see Figure 4), but as the world gradually moves towards a multipolar system, more countries are becoming uneasy about continuously relying on the US dollar as an intermediary in international payments. However, the realistic alternative options remain very limited.
For instance, the global circulation of currencies from current account surplus countries might be insufficient (this is the "Triffin Dilemma" proposed by economist Robert Triffin, who suggested establishing new reserve currency units to address this issue). Meanwhile, despite the euro being the second-largest global reserve currency, its influence remains far behind the US dollar due to the highly decentralized fiscal policies in the Eurozone and numerous institutional constraints of the European Central Bank.
We believe that for politically sensitive trade relationships, especially for current account surplus countries, assets with censorship resistance and sovereign neutrality (i.e., supranational assets) will be more attractive. Of course, the choice of such assets is extremely limited, so Bitcoin may be the most promising contender at present. In the long term, this could bring significant asymmetric upside potential for Bitcoin. However, it's important to note that its widespread adoption may still be constrained because many countries are unwilling to relinquish control over their monetary policies. Certainly, given that most commodities are still priced in US dollars, the Federal Reserve is effectively influencing the policy direction of most central banks worldwide.
Why Now?
This is precisely why we emphasize not conflating "store of value assets" with "inflation-resistant assets", although they are closely related. We define a "store of value asset" as an asset that can maintain its value over a long investment cycle, while an "inflation-resistant asset" is a tool used to address short-term price shocks and protect purchasing power. An asset can be an excellent store of value without necessarily being an effective inflation hedge, and vice versa.
From this perspective, we believe the potential capital inflow into Bitcoin could be substantial, especially in 2025 when cryptocurrency is expected to truly enter the mainstream market. The surge in Bitcoin holdings (see Figure 5) is primarily due to the introduction of investment tools like spot Bitcoin ETFs, which significantly lower the investment threshold. Meanwhile, market liquidity and depth have also significantly improved over the past five years. Beyond Bitcoin, the crypto payment sector is also accelerating, with more institutional participants gradually recognizing the unique advantages of blockchain infrastructure in improving efficiency and controlling costs.
The continuous expansion of the Bitcoin investor base is progressing in sync with multiple countries (and some US states) establishing strategic Bitcoin reserves (or digital asset reserves). In March 2025, the White House issued an executive order to officially establish a strategic Bitcoin reserve using approximately 198,000 BTC seized by the US government. Notably, China may be the second-largest national Bitcoin holder, estimated to hold around 190,000 BTC, also primarily from seized assets, although it has not yet officially launched a Bitcoin reserve plan. Simultaneously, countries like the Czech Republic, Finland, Germany, Japan, Poland, and Switzerland are exploring the feasibility of incorporating Bitcoin into their national reserve systems.
In comparison, according to data from the International Monetary Fund (IMF) and the World Gold Council, global above-ground gold reserves exceeded 216,000 tons by the end of 2024, with national central banks and sovereign fiscal departments holding approximately 17% (about $3.6 trillion) as reserves. On the other hand, affected by 2024 exchange rate fluctuations, global foreign exchange reserves decreased from $12.75 trillion to $12.36 trillion in the fourth quarter of 2024. This means gold holdings (not included in foreign exchange reserve statistics) currently account for about 23% of global comprehensive international reserves, compared to just 10% a decade ago. Additionally, Basel III will officially take effect on July 1, 2025, at which point gold will be reclassified from a Tier 3 asset to a Tier 1 "high-quality liquid asset", which may further promote the global de-dollarization asset allocation process.
As demand for the US dollar weakens, we believe more countries will seek to diversify their foreign exchange reserves in the future. By conservative estimates, if just 10% of global total international reserves are allocated to Bitcoin, its total market value could potentially increase by approximately $1.2 trillion in the long term.
Conclusion
The global monetary system is undergoing a significant transformation, characterized by increasing concerns about US fiscal and trade policies and the gradual erosion of the dollar's dominance, creating a unique development opportunity for alternative store of value assets. We believe Bitcoin, with its sovereign neutrality and immunity to international sanctions, and being increasingly viewed by more countries as a potential strategic reserve asset, is poised to significantly benefit from this trend. Simultaneously, the reclassification of gold asset categories under Basel III and the slowing pace of gold purchases by some central banks further confirm this structural transformation. Overall, we believe the world is accelerating its departure from traditional dollar dependence, and Bitcoin could become a key component of the future global financial system.
