Danny Oyekan


<p>One of the many narratives surrounding Bitcoin is that it represents a pathway to an alternative global economy that might contest the US dollar&#8217;s supremacy. After all, Bitcoin did emerge as a counterpoint to the 2008 US financial debacle, a digital champion for free markets and sound money.</p>



<p>Yet bitcoin the asset remains intricately linked to the US economy. Factors like dollar-pegged stablecoins, US regulatory sway and the sheer weight of US financial entities anchor the cryptocurrency to the old greenback.</p>



<p>Will this continue to hold true in an increasingly multipolar world? The simple answer is “yes, for now.” Is this the outcome we should expect in the long term? That would be a hard “no.”</p>



<h2 class="wp-block-heading"><strong>What hinders Bitcoin’s independence</strong></h2>



<p>Three principal factors are roping bitcoin to the dollar, hindering its complete global currency independence:</p>



<h3 class="wp-block-heading">Dollar-pegged stablecoins</h3>



<p>Stablecoins such as USDT and USDC have amplified crypto’s reliance on the US economic landscape. Bitcoin predominantly trades against the US dollar on numerous crypto platforms, often indirectly via stablecoins.</p>



<p>The controversial issuer of USDT, Tether, recently shared its <a href="https://blockworks.co/news/tether-bitcoin-exposure">Q2 attestation report</a>, where it grew to a $71 billion market cap, and it’s even larger today. In total, stablecoins are a $124 billion market, with significant influence over bitcoin’s own $500 billion one.&nbsp;</p>



<p>When a single asset makes up roughly 25% of another’s market cap, the two are correlated.</p>



<p>With bitcoin’s value so closely intertwined with the US economy, bitcoin users around the world are prey to any instability the currency faces, meaning it truly isn&#8217;t a free market yet.</p>



<h3 class="wp-block-heading">Regulatory dynamics</h3>



<p>The US regulatory landscape has a significant impact on bitcoin’s market sentiment. Any positive or negative <a href="https://blockworks.co/news/industry-reacts-new-crypto-bills">news regarding policy</a> can have ripple effects on the entire crypto market, including bitcoin.</p>



<p>Globally, crypto’s legality and mainstream acceptance are at stake. The US exerts influence on global crypto policies, framed mainly by the Financial Action Task Force (FATF)’s 2021 <a href="https://www.fatf-gafi.org/en/publications/Fatfrecommendations/Guidance-rba-virtual-assets-2021.html">guidelines</a>. And the US, given its stature, plays a pivotal role in directing FATF’s advice.</p>



<p>US legislative moves also shape institutional investor inclinations. The unfolding saga of the prospective Bitcoin ETF is a prime example of this, with entities like BlackRock and Fidelity <a href="https://blockworks.co/news/sec-bitcoin-etf-september">patiently awaiting the SEC’s verdict</a>. The recent Grayscale victory is a sure sign that institutional adoption isn’t a dream but a reality.</p>



<h3 class="wp-block-heading">Institutional acceptance</h3>



<p>US institutional adoption has further intertwined bitcoin with the nation&#8217;s economy. ETF outcomes aside, significant financial <a href="https://www.forbes.com/sites/lawrencewintermeyer/2023/07/06/big-financial-institutions-are-adopting-crypto-and-blockchain---what-does-the-technology-offer-smbs/">bodies</a> now include bitcoin in their asset arrays, tying its value to US market sentiments.</p>



<p>This means that those using bitcoin as an alternative investment are still at the whims of US firms. Let’s remember the impact Tesla’s <a href="https://apnews.com/article/tesla-buys-billion-bitcoin-061817c6795e75d1c3c9e9d6cfc4a911#:~:text=Electric%20automaker%20Tesla%20said%20Monday,Tesla's%20announcement%2C%20according%20to%20CoinBase.">purchase</a> of $1.5 billion worth of bitcoin had on the <a href="https://blockworks.co/news/tesla-keeps-holding-184m-worth-of-digital-assets-on-its-balance-sheet">market</a>.&nbsp;</p>



<h2 class="wp-block-heading"><strong>The path to decoupling</strong></h2>



<p>Many investors turn to bitcoin as a hedge against US dollar depreciation in uncertain economic climates. Yet, if current conditions continue, bitcoin might more closely mirror traditional US investment avenues like equities.</p>



<p>This scenario is problematic, to say the least. Free markets shouldn’t hinge on the US economic climate, legislative landscape or decisions by its major corporations. Bitcoin was envisioned to counter exactly this.</p>



<p>Fortunately, the bond between Bitcoin, the US and the broader American economy is breakable. As the crypto realm matures, multiple factors can help Bitcoin evolve into a truly global, uncorrelated asset.</p>



<p>Emerging <a href="https://blockworks.co/news/stanchart-crypto-stablecoin-market">stablecoins with diverse denominations</a> could promote a shift from USD-centric tokens. Enthusiasts <a href="https://cryptoforinnovation.org/non-dollar-stablecoins-gain-momentum-risks-to-usd-rise/#:~:text=Likewise%2C%20existing%20stablecoin%20companies%20are,mechanisms%20will%20mature%20as%20well.">advocate</a> for stablecoins tethered to varied currencies to lessen dependency on the US dollar, fostering a truly diversified crypto market.</p>



<p>Alternative fiat currencies include the Japanese yen or Chinese yuan as dominant bitcoin trading counterparts. Europe’s <a href="https://blockworks.co/news/eu-parliament-passes-mica-vote">MiCA legislation</a> might lead to more diversity in the form of EUR-denominated stablecoins. But this potential shift will take time — likely many years.</p>



<p>There&#8217;s also notable momentum toward augmenting bitcoin’s global adoption, reducing US market dependency. Efforts include regional partnerships, educational drives, and crafting use cases specific to areas like Africa and Latin America, where Bitcoin’s appeal as a sovereign currency resonates.</p>



<p>Crypto champions are continuing to <a href="https://blockworks.co/news/france-updates-crypto-regulations">actively working with regulators</a> globally, striving for balanced rules that spur innovation without undue US influence. This regulatory diversity poses challenges for regions reluctant to welcome Bitcoin and its peers.</p>



<p>Technological strides are boosting Bitcoin’s reach and applicability, rendering it more apt for regular global transactions. Universal adoption for purposes beyond just a value reserve could insulate Bitcoin from single-economy volatilities.</p>



<h2 class="wp-block-heading">Reflecting on what’s to come</h2>



<p>Bitcoin’s intrinsic potential to foster free markets has remained unchanged since 2009. Roughly fifteen years after its inception, stakeholders — both within and outside the US — are still unlocking its possibilities.</p>



<p>In this narrative, the US dollar, economy and geopolitical clout remain pivotal in the cryptocurrency&#8217;s evolution. Yet as bitcoin and its ecosystem evolve, its reliance on the US dollar has a chance to diminish, heralding a more balanced global economic landscape.</p>



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<div class="wp-block-post-author-biography">Danny Oyekan is the founder and CEO of Blockfinex, a Dubai-based digital asset exchange platform. Danny started his entrée into blockchain in 2012 when he became one of the earliest cryptocurrency investors. After leveraging his knowledge of the ecosystem, Danny used earnings from his Bitcoin investments to found Dan Ventures, a venture capital firm dedicated to funding the next generation of finance through blockchain technology, cryptocurrencies and digital assets.</div>


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Bitcoin remains tied to the US economy, and that needs to change

Ben Strack

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                <li>Product is designed to offer collateralized dollar-denominated yield at a 5% rate</li>
                <li>21Shares is looking into expanding its presence in several dozen countries</li>
            </ul>
    
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<p>Cryptocurrency exchange-traded product issuer 21Shares’ latest fund is designed to divvy up yields&nbsp; to investors amid concerns around inflation and fluctuating interest rates.&nbsp;</p>



<p>The 21Shares USD Yield ETP (USDY) offers collateralized dollar-denominated yield at a 5% rate, the firm told Blockworks. The product generates yield by taking in US dollars and lending them to crypto counterparties against a minimum of 110% collateral in bitcoin and ether marked-to-market daily.</p>



<p>USDY — an exchange-traded product (ETP) — is set to become available on the SIX Swiss exchange on Wednesday and is available to investors in US dollars, with a fee of 30 basis points.&nbsp;&nbsp;</p>



<p>“We see this ETP as a useful tool for investors to navigate market volatility and stay invested through complex market conditions — like today’s,” 21Shares President Ophelia Snyder said. “While investors grapple with inflation, fluctuating interest rates and a range of economic pressures, this product is a first-of-its-kind way for investors to both gain maximum exposure to risk-adjusted yield and preserve liquidity in their portfolios.”&nbsp;</p>



<p>21Shares, which has more than $2.5 billion of assets under management, has launched a range of digital asset investment products this year, with more in the pipeline.</p>



<p>The Switzerland-based company earlier this month launched two <a href="https://cms.blockworks.co/21shares-two-latest-crypto-funds-keying-in-on-defi/" target="_blank" rel="noreferrer noopener">DeFi-focused ETPs</a> and more recently <a href="https://cms.blockworks.co/worlds-largest-crypto-exchange-traded-product-issuer-enters-us-market/" target="_blank" rel="noreferrer noopener">entered the US market</a> with two index funds offering diversified exposure to some of the space’s largest assets.</p>



<p>21Shares intends to launch between 20 and 30 additional ETPs by the end of this year, Snyder said.&nbsp;</p>



<p>The executive previously told Blockworks that 21Shares intends to establish a Middle Eastern foothold next month in Dubai. Snyder added that the company is looking at bolstering its presence in several dozen countries around the world.</p>



<p>“Our goal is to build bridges between the cryptocurrency and institutional investing world and increase accessibility to some of the world’s largest cryptocurrencies and blockchain ecosystems,” Snyder said.&nbsp;</p>



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