The recent depreciation of the US dollar has become a central topic in international financial discussions. According to an S&P Global report, the dollar index fell nearly 10.8% in the first half of the year, marking the most significant decline since 1973.
US Dollar Index and Its Decline
According to S&P Global, the dollar index has reached its lowest levels since February 2022. There is a consensus that various economic and political factors contribute to the rapid depreciation of the dollar. These include uncertainties in trade policies, rising tariffs, threats to the independence of the US Federal Reserve, increasing national debt, and inflation concerns. These circumstances lead to a loss of confidence among investors.
Reserve Currency Status and Cryptocurrencies
There are longstanding structural issues related to the dollar’s depreciation. According to Elias Haddad, Global Macro Strategist at Brown Brothers Harriman, the loss of confidence in US trade, fiscal, and security policies could weaken the dollar’s reserve currency status. "By all metrics, the dollar remains the dominant store of value, medium of exchange, and unit of account globally. However, distrust in US policies may accelerate the dollar’s decline as the primary reserve currency." Under current conditions, the risk of the dollar losing its international reserve currency role is increasing.
Conclusion: Future of the Dollar and Cryptocurrencies
The historic depreciation of the dollar in the first half of the year raises new questions about US's traditional leadership in the global financial system. Unpredictable policy decisions and the increasing debt burden create uncertainties about the dollar’s future stability. Meanwhile, the weakening of the dollar might enhance the rise of cryptocurrencies. If market uncertainties decrease somewhat, cryptocurrencies could finally achieve the long-anticipated growth.
The historic drop of the dollar in the first half of the year indicates significant changes in the global economy. Financial decisions made now will greatly influence the dollar's status and the future global economic balance.
