The US dollar is at risk of losing its status as the world’s dominant currency. That’s according to one strategist at JP Morgan’s private bank who is advising wealthy clients cut their dollar holdings in half.
“We believe the dollar could lose its status as the world’s dominant currency (which could see it depreciate over the medium term).”
It’s a stark wake-up call, reminding investors that global reserve currencies do not last forever.
While the note doesn’t mention it directly, bitcoin is an obvious hedge for many of the issues cited by JP Morgan. The private bank also recommends clients increase their portfolio allocation to a “store of value,” specifically gold. Arguably, bitcoin is also becoming a recognized store of value and may deserve a place in a defensive portfolio.
We’re approaching a major turning point in economic history when the world unplugs from the dollar. This might sound crazy, but it’s not a new phenomenon. As the note explains:
“There is nothing to suggest that the dollar dominance should remain in perpetuity. In fact, the dominant international currency has changed many times throughout history going back thousands of years as the world’s economic center has shifted.”
Before the dollar, the world’s dominant currency was the British pound. Before that, the French franc and Dutch guilder – currencies that no longer even exist.
The note points to rising economic dominance in China, India, and other parts of Asia. As JP Morgan explains: