Central banks may hedge the dollar with bitcoin

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You may have noticed that a few of the big league fiat currencies are in trouble this week. The US dollar and British sterling have been on a downward slide, the latter due to the battle Brexit and the new prime minister’s aggressive talking up of leaving the EU without a deal. The dollar is taking a beating due to the President’s stance on the China trade tariff war. Sometimes it pays to keep quiet.

Anthony Pompliano, a renowned bitcoin bull, believes that every central bank will be buying bitcoin to hedge the risks to the US dollar. Pompliano is the co-founder of asset manager firm Morgan Creek Digital Assets. On 1st August he tweeted that “central banks had made the largest historical acquisition of gold.” The Financial Times reported the story, revealing that “global central banks purchased a record of $15.7 billion in the first half of 2019 in order to diversify their reserves from the U.S. dollar amid global trade tensions.” The FT report also mentioned that the central banks accounted for almost one-sixth of total gold demand in the period.

The World Gold Council takes the view that geopolitical uncertainty will lead to the banks increasing their gold purchases, as you might expect. However, Pompliano takes a different view. He believes that banks will turn to Bitcoin as a store of value that is unrelated to traditional assets: “Wait till they find out about the non-correlated, asymmetric upside profile of Bitcoin. Every central bank will be buying Bitcoin.”

Pompliano has already had debates with Peter Schiff, who Cointelegraph calls a “gold bug”. He thinks bitcoin is some kind of religion and that investors are only hoping to get rich from their holdings while blind to reality. Schiff said, “When you’re in a bubble, you can’t see the bubble,” and claimed Bitcoin had no intrinsic value.

One witty commentator on the Cointelegraph article remarked, “Eventually they might be issuing fiat backed by bitcoin,” referring to the central banks. Now there’s a thought.

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