By Granite State Report
Debt-heavy, dollar-centric finance is creaking under its own weight, while Bitcoin—programmable, scarce, borderless—has quietly matured into a plausible alternative settlement layer and savings instrument for a multipolar world.
Executive summary
- The dollar isn’t “dead,” but its dominance is fraying at the edges. The U.S. dollar still accounts for ~58% of disclosed global FX reserves and remains the premier invoicing currency in trade. Yet central banks are diversifying into gold and, at the margins, other currencies, signaling hedging behavior against fiscal and geopolitical risk. (Reuters)
- The U.S. fiscal position is deteriorating. Gross federal debt has crossed $37 trillion with rising interest costs and large refinancing needs—an arithmetic that risks eroding confidence over a long enough horizon. (AP News)
- Bitcoin is evolving from speculative asset to monetary infrastructure. Spot ETFs have expanded institutional access; the network’s security (hashrate) and tooling (custody, Lightning, federated wallets) keep improving. Environmental and scalability critiques are real, but they are being mitigated with better energy sourcing and Layer-2 rails. (CoinMarketCap)
- Bottom line: In a world of higher debt, weaponized finance, and rising multipolarity, a dual-track system is likely: the dollar remains the primary unit of account and trade vehicle, while Bitcoin grows as a global, neutral savings and settlement asset—especially for jurisdictions, institutions, and individuals seeking digital bearer money outside state credit systems. (Federal Reserve)
Figures: U.S. federal debt (FRED); IMF/COFER currency shares; U.S. debt-to-GDP (FRED); Cambridge/CCAF energy chart (via Mongabay recap).
1) The dollar system: unrivaled yet increasingly hedged
Still dominant by the numbers. The most recent IMF COFER and Federal Reserve updates show the dollar’s reserve share broadly stable around the high-50s, with the euro and yen much smaller and the renminbi still low single digits. In trade invoicing, the dollar and euro together account for well over 80% globally. This is not free-fall. It’s primacy with hairline cracks. (IMF COFER, Fed 2025 note, ECB invoicing insight.) (Reuters)
But hedging behavior is unmistakable. Central banks have been buying record amounts of gold for three consecutive years, a move widely interpreted as a hedge against sanctions risk, fiscal slippage, and financial repression. (World Gold Council, Reuters.) (World Gold Council)
“Weaponization” is a live policy variable. A growing body of research explores how sanctions and the extraterritorial reach of dollar plumbing push some states to explore alternatives. Even if aggregate reserve data hasn’t cratered, the marginal behavior—gold accumulation, alternative payment channels—points to caution with dollar exposure. (NBER working paper.) (NBER)
Trade invoicing remains sticky. Recent IMF work on global invoicing currency patterns (1990–2023) shows only gradual change: the dollar remains the global vehicle currency, with renminbi usage rising but still modest. (IMF WP 2025/178.) (IMF)
Reality check: The dollar is not “dying.” It’s dominant—but the hedge against it is growing.
2) The U.S. fiscal trap: debt, deficits, and interest costs
Debt stock: The U.S. national debt has surpassed $37 trillion. The pace has accelerated, with around $1 trillion added roughly every five months at recent clips. (AP, FRED series GFDEBTN.) (AP News)
Interest burden: As rates rose, net interest has swollen toward the scale of major line items in the federal budget. The roll-over risk—$9T+ in Treasuries maturing in the near term—tightens the vise if rates stay elevated. (Context via Fed and market commentary; see also mainstream analyses summarizing roll-over exposure and investor mix.) (Federal Reserve)
Why that matters for money: The dollar is both a currency and a claim on U.S. public credit. Persistent primary deficits raise the temptation toward financial repression—inflation above rates or regulatory compulsion—to manage debt service. Over long horizons, that erodes the purchasing power of dollar savings and can nudge global allocators to diversify.
Reasonable inference: No imminent collapse—but persistent fiscal stress + politicized fights over the debt ceiling are a reputational tax on the dollar brand. (FRED)
3) What Bitcoin uniquely offers
Hardness without a sovereign. Bitcoin is digital bearer money with a credibly fixed supply (21 million), enforced by open-source consensus across a globally distributed network. It’s not anyone’s liability. That makes it orthogonal to sovereign credit cycles, which is precisely the hedge some actors now want. For a crisp explainer of the underlying mechanics—hashing, proof-of-work, blocks, and consensus—see 3Blue1Brown’s classic walkthrough. (Video.) (YouTube)
Institutional access improved. The approval and growth of spot Bitcoin ETFs in major jurisdictions has lowered custody frictions, enabling pensions, RIAs, and conservative allocators to hold exposure inside existing mandates. Daily AUM dashboards show steady institutionalization tracking price and flows. (CoinMarketCap ETF list, CoinGlass AUM tracker.) (CoinMarketCap)
Neutral settlement layer. Bitcoin can serve as final settlement across borders without permission from correspondent banking networks. Layer-2 protocols (e.g., Lightning) enable instant, low-fee payments for retail use and remittances, though capacity metrics ebb and flow as the network evolves. (Cryptoslate.) (CryptoSlate)
Censorship resistance and portability. In a world where payment rails double as policy tools, Bitcoin’s core properties—peer-to-peer value transfer, seizure resistance when self-custodied—are not abstract ideals; they’re operational features.
4) The critique: volatility, energy use, and scale
Volatility is real. Bitcoin remains a high-beta asset, with drawdowns exceeding 70% historically. That’s not a stable unit of account for day-to-day pricing. The more credible case is Bitcoin as a store-of-value and settlement asset, not a near-term replacement for fiat unit-of-account functions.
Energy footprint. The network consumes significant electricity. The authoritative Cambridge Bitcoin Electricity Consumption Index (CBECI) tracks estimated power usage; consumption has risen with price and hashrate. (CBECI, Mongabay overview.) At the same time, miners are increasingly co-locating with stranded, curtailed, or otherwise wasted energy (hydro spillover, flare mitigation, demand-response), a dynamic cataloged in industry and academic studies. Trend-wise: the mix is improving, but the critique remains salient where grids are coal-heavy. (ccaf.io)
Throughput constraints. Base-layer Bitcoin intentionally prioritizes finality and security over throughput (~7 transactions per second). Scaling is handled off-chain (Lightning) or via federations and batched settlement. Lightning capacity dipped in 2025—interpreted by many as architectural churn more than retreat in usage—but the stack is still pre-mainstream. (Coverage on capacity dynamics.) (CryptoSlate)
Policy and compliance. States will regulate on- and off-ramps, surveillance, tax reporting, and AML/KYC. That shapes user experience but doesn’t change the base protocol’s permissionlessness.
5) What recent experiments teach us (El Salvador, stablecoins, CBDCs)
El Salvador’s legal-tender bet: El Salvador adopted Bitcoin as legal tender in 2021. Academic assessments are mixed and often skeptical: low everyday usage, technical hurdles, and volatility limited consumer adoption, while the country nonetheless accumulated some BTC reserves. More recent scholarship questions the efficacy of dual legal tender regimes without robust infrastructure and education. (ScienceDirect 2025 article; critical paper via SvedbergOpen.) (ScienceDirect)
Stablecoins as “crypto-dollars.” Dollar-pegged stablecoins have quietly become cross-border settlement tools in DeFi and, increasingly, commerce. The BIS 2025 Annual Economic Report flags both their growth and their fragilities without robust regulation; CoinDesk’s mid-2025 data review finds the sector expanding toward the hundreds of billions in market cap. (BIS 2025; CoinDesk Data.) (Bank for International Settlements)
CBDCs (central bank digital currencies). Many central banks are piloting state digital money. CBDCs can improve efficiency but raise privacy and programmability questions—features often cited by Bitcoin advocates as reasons to prefer non-state digital cash. For a policy-side introduction, see BIS explainers and talks by its leadership. (Sample videos below.) (Bank for International Settlements)
Interpretation: Stablecoins show the demand for digital dollars, CBDCs show the state’s response—and Bitcoin remains the non-sovereign alternative those projects cannot be by design.
6) How a Bitcoin-anchored future could actually work
Likely path isn’t binary “flippening.” The dollar will almost certainly remain the unit of account for global trade and most contracts for years. But the savings and settlement layer could pluralize, with Bitcoin playing a role analogous to digital gold—a supranational reserve that clears across borders without trust in any one state.
Three concrete use-cases already visible:
- Treasury reserve diversification. Corporates and even some public entities hold small BTC allocations as a hedge—now easier via ETFs or qualified custody. If adopted prudently, this is analogous to gold hedges central banks have embraced. (ETF data hubs track flows and AUM.) (CoinMarketCap)
- Cross-border settlement and remittances. Lightning or batched on-chain channels can move value where correspondent banking is costly or unreliable. LatAm and parts of Africa/Asia are the natural early adopters.
- Sanctions-resilient commerce (at the margins). Not a panacea—on/off-ramp surveillance is real—but self-custodied, peer-to-peer settlement provides optionality for those who need it.
What would accelerate this track?
- Sustained U.S. fiscal profligacy that forces negative real returns on Treasuries;
- Expansion of financial sanctions that nudge non-aligned countries to seek neutral rails;
- Continued gold buying by central banks paired with small, experimental BTC holdings by sovereign funds or public institutions;
- Mature custody and accounting standards that derisk board adoption;
- Energy integration where mining stabilizes grids and monetizes waste gas, dampening environmental critiques.
What could derail it? A severe protocol-level failure, a successful, coordinated global crackdown on off-ramps, or a new technology offering non-energy-intensive digital bearer properties with similar decentralization.
7) The honest counter-case: why the dollar might hold the crown for longer than Bitcoiners think
- Network effects are colossal. The dollar’s incumbency in reserves, invoicing, and deep safe-asset markets (U.S. Treasuries) is extraordinarily hard to replicate. The Fed’s 2025 review notes foreign holdings of marketable Treasuries around $9 trillion, reflecting unmatched depth and liquidity. (Federal Reserve)
- Rule of law, for all its messiness. U.S. capital markets, contract enforcement, and disclosure regimes remain the gold standard, even when D.C. politics resembles a food fight.
- Volatility/UX gap. Until BTC volatility dampens and non-custodial UX improves dramatically, large-scale unit-of-account adoption is unlikely.
Our read: The most probable world is hybrid—dollar primacy and a rising role for neutral assets (gold and Bitcoin) as savings and settlement backstops.
8) Practical implications for policymakers, institutions, and citizens
For policymakers: Credible fiscal consolidation, predictable regulation of digital assets and stablecoins, and respect for the neutrality of payment rails will prolong dollar leadership. Sanctions should be targeted and rare, not routine—overuse hastens the search for alternatives. (NBER)
For institutions: Treat Bitcoin like emerging monetary infrastructure. Consider measured exposure via ETFs or cold-storage mandates; invest in operational playbooks for custody, accounting, and incident response. Track BIS and IMF guidance on tokenization, stablecoins, and cross-border payments. (Bank for International Settlements)
For citizens: If you self-custody, learn key management; if you use ETFs or exchanges, understand counterparty risk. Align usage with your risk tolerance: store of value and cross-border payments are the sweet spots today, not price-stable daily spending.
Conclusion
The dollar’s network effects and safe-asset depth won’t evaporate. But the direction of travel is obvious: more hedging, more neutral settlement, more digital, bearer-style savings. Gold has already returned to the main stage for central banks. Bitcoin is the digital heir to that instinct—auditable, portable, divisible, programmable.
Call it what you want—digital gold, apolitical collateral, an exit valve—Bitcoin is positioned to grow alongside, not necessarily replace, the dollar system. If U.S. fiscal and geopolitical policy stay disciplined, the status quo lasts longer. If not, the world has a credible, market-chosen fallback this time—and it’s running, in the open, 24/7.
References & further reading
- Dollar dominance & reserves
- IMF COFER updates; Q4-2024 share near 57.8% for USD (Reuters summary) — (Reuters)
- Federal Reserve (2025): The International Role of the U.S. Dollar – 2025 Edition — foreign holdings of marketable Treasuries ≈ $9T; dollar role broadly stable — (Federal Reserve)
- IMF WP 2025/178: Patterns of Invoicing Currency in Global Trade — dollar & euro invoicing shares broadly stable; RMB modest but rising — (IMF)
- ECB (2025): Invoicing article — USD + EUR > 80% of global invoicing — (European Central Bank)
- U.S. debt & fiscal dynamics
- Gold as reserve hedge
- World Gold Council (2024): Central bank surveys; record buying streak — (World Gold Council)
- Reuters (Feb 2025): 2024 gold demand and central bank purchases — (Reuters)
- Sanctions & “weaponization” literature
- NBER (2024–25): International Sanctions and Dollar Dominance — mechanisms and effects — (NBER)
- Bitcoin’s institutionalization & scaling
- CoinMarketCap: Bitcoin ETF landscape and AUM — (CoinMarketCap)
- CoinGlass: Spot ETF AUM dashboard — (coinglass)
- CBECI (Cambridge): Electricity consumption index; methodology and updates — (ccaf.io)
- Cryptoslate (2025): Lightning capacity trends and interpretation — (CryptoSlate)
- Case studies: El Salvador, stablecoins, CBDCs
- ScienceDirect (2025): Two legal tenders, no currency — critical analysis of El Salvador’s dual-tender policy — (ScienceDirect)
- SvedbergOpen (2025): The Rise and Fall of Bitcoin as Legal Tender — (svedbergopen.com)
- BIS Annual Economic Report (2025): Tokenization, stablecoins, CBDC chapters — (Bank for International Settlements)
- CoinDesk Data (2025): Stablecoins & CBDCs Report — market sizing and policy overview — (CoinDesk)
Final take
The U.S. can keep the dollar preeminent if it reins in deficits, avoids overusing financial coercion, and modernizes payments without sacrificing privacy and openness. If it doesn’t, markets already have a credible, neutral alternative—born of math, not a ministry. It’s not hype to say Bitcoin is on the shortlist for the backbone of a more plural, permissionless monetary future. It’s simply where the incentives point.
