"Already Collapsed"...Bitcoin and Gold, Tearing Down Petro-dollar Hegemony

▲ Gold, Bitcoin (BTC), Dollar (USD)/AI Generated Image

The petrodollar system, which has sustained the global financial order for decades, is showing signs of cracking, raising the possibility of structural changes across the asset market.

Crypto analyst Lark Davis analyzed in a video released on April 19 (local time) that the U.S. dollar's status as a reserve currency faces structural challenges. He explained that the petrodollar agreement signed between the U.S. and Gulf Cooperation Council (GCC) countries in 1974, after the suspension of gold convertibility in 1971, was the core foundation of dollar hegemony. At that time, the U.S. maintained global dollar demand by restricting oil payments to dollars in exchange for providing military protection.

Recent geopolitical conflicts are acting as factors that are cracking this structure. Davis diagnosed that the freezing of Russian assets imprinted the risks of the dollar system on major countries such as China and Brazil. The moves by some countries to use other currencies or digital assets instead of the dollar for energy transactions are interpreted as a sign that the existing order is shaking.

Statistical indicators also support the trend of change. The proportion of the dollar in global foreign exchange reserves has shown a long-term declining trend, and major countries are adjusting their strategies by reducing their holdings of U.S. Treasury bonds and increasing their gold holdings. This signifies that the dollar-centric structure is gradually being decentralized.

In terms of asset allocation, alternatives to counter the volatility of fiat currency values are emerging. Davis suggested the possibility that gold and Bitcoin, with its limited supply, could gain attention as long-term stores of value. The strategy of converting short-term profits into more stable assets is also mentioned as a valid response.

Changes in the petrodollar system are likely to occur over a long-term trend rather than abruptly in the short term. Amidst the rise of the yuan and a continued decline in dollar demand, a new financial order led by BRICS countries and Middle Eastern nations is also emerging. Strategic responses from investors are required at a time when the axis of global capital flows is shifting.

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