Bank of America survey report: The dollar is declining, Bitcoin is rising

On December 15, in the "Global Fund Manager Survey" conducted by Bank of America/Bank of America Securities on fund managers this month, the top three most popular transactions were: long technology stocks, short the US dollar, and long Bitcoin.

The fact that "long Bitcoin" and "short USD" have become some of the most popular trades actually represents the decline of fiat currencies represented by the U.S. dollar and the rise of Internet currencies represented by Bitcoin.

The decline of the dollar

Currency itself is changing with the development of society. Currency was originally shells or salt, and copper and iron also served as currency for a period of time. Before the 19th century, the foundation of the world's monetary system was the silver standard. After Newton proposed the gold standard (Newton proposed that the price of gold per ounce was fixed at 3 pounds 17 shillings and 10.5 pence), the world's monetary system began to turn to the gold standard. In July 1944, the Bretton Woods system determined that the US dollar was the foundation of the international monetary system (1 ounce of gold could be exchanged for 35 US dollars). Since the decoupling of the US dollar from gold on August 15, 1971, the US dollar, a paper currency issued by national credit, has depreciated by about 98%.

The already precarious paper currency system suffered a further severe blow under the impact of the epidemic at the beginning of the year; and with the recurrence of the epidemic, central banks of various countries are further rushing to print money, "promoting" currency depreciation.

According to the latest ECB meeting statement in December, "in view of the impact of the resurgence of the (new coronavirus) pandemic on the economy", the ECB Governing Council decided on the same day to expand the scale of the emergency asset purchase program from the previous 1.35 trillion euros to 1.85 trillion euros, and the bond purchase will continue until at least March 2022. At the same time, the ECB also announced the extension of a number of preferential financing measures implemented during the epidemic, such as the third batch of targeted long-term refinancing operations.

According to Jinshi.com, on December 16, US House Speaker Pelosi invited leaders of the Democratic and Republican parties to discuss a new round of relief plans. US Senate Majority Leader McConnell said that everyone has reached an agreement on "not leaving Washington without a deal." It is reported that the plan may be implemented this week.

The chart below shows the changes in the size of the balance sheets of the world's four largest central banks since 2000.

Munger, a close friend of Buffett and vice chairman of Berkshire Hathaway, warned about the unprecedented quantitative easing (QE) and fiscal deficit in the United States at an online event held by the California Institute of Technology on Monday. Munger said: "We are in uncharted waters. No one has ever printed money on a large scale for a long time like we are now without causing trouble. I think we are close to the edge of playing with fire."

The rise of Bitcoin

The Internet economy has now been deeply integrated into our economic life, but this social change has actually only occurred gradually in the last decade. The following chart shows the changes in the rankings of the top ten companies in the world by market value over the past 30 years.

As can be seen from the above figure, most of the Internet giants we are familiar with have grown rapidly in the past ten years, and the same is true for Bitcoin. On November 1, 2008, Satoshi Nakamoto released the Bitcoin white paper, and Bitcoin was officially born on January 3, 2009. From less than a few cents at the beginning, it has risen to the current $19,370 per coin.

With the rapid development of blockchain technology and the Internet economy, the value of Bitcoin, the Internet's native currency, has been recognized by more and more people, especially the world's wealthy people who have bought it are increasing rapidly; in addition, traditional financial markets have also begun to accept Bitcoin in all aspects, including investment institutions, banks, traditional financial trading markets, family wealth management funds, and national social security funds, etc.

The change in the attitude of the entire market can be seen from the transformation of Dalio, the founder of Bridgewater Fund. Last month, Dalio hinted that Bitcoin is not a good value storage tool due to its high volatility and the potential for government bans. But this month, Dalio said that Bitcoin (and some other digital currencies) have established themselves as meaningful asset alternatives similar to gold in the past decade. Bitcoin has similarities and differences with gold and other mobile wealth assets with limited supply (unlike real estate). It has to be said that the rich learn very quickly.

Wealth does not disappear out of thin air

When you feel that the money in your hands is worthless, it is useless to complain. Human wealth will not disappear out of thin air, but wealth will transfer. What we need to do is to think about where the wealth starts to flow.

In today's society, humans are undergoing a great migration to the Internet. Many of people's original offline lifestyles have actually been replaced by new lifestyles on the Internet, and there will be more in the future, which naturally includes currency. The central bank digital currencies of some countries with limited credit will continue to depreciate and may even disappear in the competition; however, Bitcoin will not completely replace the central bank digital currencies of powerful countries, but will lead to more diversified competition under the distributed nature of the Internet.