The U.S. dollar is set to end 2023 with its first yearly loss since 2020 thanks to the Federal Reserve’s dovish pivot—triggering predictions of a surprise “Biden bailout.”
The bitcoin price has rocketed higher as the U.S. dollar as sunk this year, riding the Fed rally and as Wall Street giant BlackRock quietly opens the door to a “trillion-dollar plus” game-changer.
Now, with some predicting former U.S. president Donald Trump will spark a bitcoin price boom in 2024, Iran and Russia have signed a deal to trade in their local currencies instead of the U.S dollar, with one economist warning the “demise of the U.S. hegemony is really upon us.”
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“Banks and economic actors can now use infrastructures including non-Swift interbank systems to deal in local currencies,” Iran’s state media reported this week.
Russia and Iran, both subject to strict U.S. sanctions, have been working to remove their dependence on the U.S. dollar in recent years, undermining global dollar dominance.
The group contries known as Brics—Brazil, Russia, India, China, and South Africa—have led efforts to escape U.S. dollar hegemony, with Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates due to join them as five new member states from the beginning of 2024.
As a result, some think the world order is shifting away from reliance on the U.S. dollar, with countries looking to cleave from from the U.S.-led global financial system.
“They are not buying Treasury bonds anymore and they are diversifying [away from] our dollar into gold, into oil, and strategic resources,” economist Stephanie Pomboy, the founder of MacroMavens, told Tucker Carlson on X. “And they’re starting to trade in local currencies. They don’t have to transact in dollars. The demise of the U.S. hegemony is really upon us, and the Biden administration and so many in Washington are just sleeping right through it.”
China, with the development of its bitcoin-inspired digital yuan central bank digital currency (CBDC), has increased its share of international payments to a record high in 2023, making it the fourth most used currency in November, according to data from the Swift Financial System.
The U.S. dollar’s share of global currency reserves shrank slightly in the third quarter, according to International Monetary Fund (IMF) data out earlier this month showing the dollar slipped to 59.2% of global central bank reserves, down from 59.4% in the three months prior.
Wall Street bets against the U.S. dollar going into 2024 have increased in recent weeks as Fed chair Jerome Powell stuck a surprisingly dovish tone thanks to the fall in inflation this year. Fed officials forecast 75 basis points in rate reductions for 2024 at its December policy meeting though the market is now pricing in 150, according to swaps data reported by Bloomberg.
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The Fed has also come under pressure to cut interest rates due to its soaring interest bill, something that some think could risk the return of inflation—and helping gold and the bitcoin price rally.
“The U.S. latest annual fiscal deficit was $1.7 trillion in the year to September 2023, the third-worst number on record, and the annualised interest bill has hit $1 trillion, or 20% of tax income,” Russ Mould, investment director at brokerage AJ Bell, said in emailed comments.
“The U.S. cannot afford to keep interest rates where they are for long and there is a risk that the Fed has to cut rates to keep the burden manageable and take risks with inflation. This may be why gold (and bitcoin, for that matter) are on a roll. Markets are pricing in five rate cuts from the Fed in 2024, but because inflation is cooling and growth benign, not because debt is a problem and interest costs are squeezing economic growth.”
The bitcoin and crypto price boom this year has pushed the crypto market to around $1.6 trillion, double where it started 2023 and reaching highs not seen since early 2022.
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