Bitcoin Becomes A Perpetual Put Option On The U.S. Dollar

The U.S. dollar remains the world’s dominant reserve currency. But its share of global reserves has steadily declined, from around 72% in 2001 to 58% in 2024, according to the Federal Reserve.

The global order is becoming more multipolar. IMF data shows that China’s share of the global economy based on purchasing power parity (PPP) is projected to reach 19.7% in 2025, compared to 14.8% for the United States. The military balance is also shifting. China’s defense spending continues to grow at a double-digit pace, while the U.S., still the largest military spender globally, is increasingly constrained by the rising cost of debt service, which limits its fiscal flexibility.

These factors are prompting investors to seek alternative reserve assets. Another sign of the global “search for insurance” against currency and geopolitical risk is the growing demand for gold by central banks. In 2024, gold prices rose by approximately 27%. In 2025, the metal broke new records, trading above $3,800 per ounce.

Bitcoin as a future reserve asset

Despite growing popularity, crypto adoption is still in its early stages. According to The Kobeissi Letter, only around 14% of Americans currently hold any form of crypto, and about 75% of investors have zero exposure.

However, the infrastructure is developing rapidly. Stablecoin capitalization hit an all-time high in August 2025, reaching $280 billion. Institutional adoption is also accelerating. U.S. spot bitcoin ETFs have attracted tens of billions of dollars in inflows. BlackRock’s iShares Bitcoin Trust (IBIT), for example, now manages hundreds of thousands of BTC.

Without large-scale fiscal consolidation, the US remains on a trajectory of growing deficits and debt. The CBO forecasts an increase in publicly held debt to 156 percent of GDP by 2055. Net interest payments already reached a record high in 2024 and, according to the Pew Research Center, exceeded defense and Medicare spending. This means continued large-scale borrowing and, in stress scenarios, expansion of the monetary base through QE mechanisms.

When the dollar weakens, assets rise. Historically, the weakening of the DXY, a widely used measure of the US dollar’s strength against a basket of six major currencies, has often been accompanied by growth in commodity markets. For bitcoin, the relationship is more complex, but during periods of dollar weakness and easing financial conditions, BTC often leads in terms of returns.

What does this mean for bitcoin’s long-term price?

It makes sense to view bitcoin through the lens of the U.S. dollar’s real value. The dollar’s purchasing power has declined steadily for decades, and in that context, the long-term repricing of a scarce asset like bitcoin is not speculative; it reflects a broader macroeconomic trend.

Unlike fiat money, the issuance of bitcoin is algorithmically limited to 21 million coins. This hard limit is built into its code, creating a predictable scarcity.

If the U.S. fiscal outlook continues to deteriorate, repricing may happen in sharp leaps. 5x to 10x moves over a long horizon are more a reflection of monetary and fiscal regime shifts than any “crypto-specific magic. Regulation, ETFs, and institutional flows may shape the trajectory, but the core dynamic remains: limited supply versus an expanding monetary base.

This leads to an important conclusion: owning bitcoins is a perpetual option on the world’s rejection of the dollar as the sole reserve asset.

In the base case, the dollar continues to lose purchasing power as cryptocurrency infrastructure and adoption expand, a structural tailwind for bitcoin. In the accelerated scenario, as seen in past crises, capital flows into “anti-dollar” assets like gold and bitcoin. With higher beta and agility, BTC tends to respond more quickly and aggressively.

Bitcoin is not yet part of official central bank reserve baskets, apart from sovereign experiments like El Salvador. But the direction is clear. Record-level institutional flows into ETFs, surging stablecoin use, rising gold purchases by central banks, and a growing policy interest in digital assets all suggest the same trend. It won’t happen overnight, but the window is open.

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