Rewards1: The Trade War is Bullish For Bitcoin

The Trade War is Bullish For Bitcoin

On June 16, 2009, four of the most powerful men in the world met in Yekaterinburg, Russia.

The topic of the meeting: Dethroning the U.S dollar.

Regardless of what you've heard or seen in the mainstream financial media about trade imbalances, the U.S. dollar still dominates global trade.

It's on one side of almost 90% of global forex (foreign exchange) transactions, according to Bank of International Settlements Data. That dominance as a settlement currency in global trade gives the United States control over the world's financial system.

The four men who met in Yekaterinburg knew this reality. And for years, they'd been chafing under a global trade regime that forces them to hold U.S. dollars in reserve.

That's why Luiz Inácio Lula da Silva, Dmitri Medvedev, Manmohan Singh, and Hu Jintao decided to join forces during that fateful meeting in Yekaterinburg in June 2009.

At the time, they were the leaders of Brazil, Russia, India, and China, respectively – the so-called BRIC nations. (South Africa joined in 2010, making it BRICS.)

Combined, the BRICS account for 40% of the global population… Produce about 24% of world GDP… And hold 40% of gold and hard currency reserves.

Many expected a geopolitical bloc of that size would stand as a bulwark against the mighty dollar. It just needed an alternate global currency to settle trades.

After more than 10 years, it hasn't.

Why not? It boils down to trust.

Brazil doesn't want to settle trades in Russian rubles. Russia doesn't want Indian rupees. India doesn't want Chinese yuan. And China doesn't want Brazilian reals.

Meanwhile, the rest of the world has shown no appetite for accepting a basket of BRICS currencies to settle trades.

From their standpoint, the BRICS view U.S. dollar hegemony as a fundamental problem. But they're putting forward the wrong solutions.

The need for a solution grew even greater on April 2, when President Trump imposed one of the most aggressive global tariff regimes in history. It sent a shockwave across the global economy. And I believe the BRICS will have no choice but turn to an unconventional weapon as a countermeasure: bitcoin.

The "Unconventional" Weapon of Global Trade

On April 2, the Trump administration imposed a universal 10% tariff on nearly every U.S. trading partner. And reciprocal tariffs of up to nearly 50%.

Just a week later, the White House announced a 90-day pause on reciprocal tariffs except those against China… But kept the universal 10% tariffs in place. China has since retaliated with tariffs of up to 125% on certain U.S. goods.

Of course, the market has experienced wild volatility since the trade war began to escalate. Since the close on April 2nd (as of writing), the S&P 500 is down 5.4% and the Nasdaq 5%. Meanwhile, bitcoin is up 2.32%.

Now, President Trump believes his tariff regime will level the playing field between the United States and its trading partners, and reshore U.S. manufacturing operations. The aggressive use of tariffs is a gambit he believes will help him achieve his policy goals.

I don't know if it'll work. Only time will tell.

What I do know is the rest of the world sees President Trump's tariff policy as inconsistent and incoherent. One day, they're on. The next, they're off.

So far, it's been viewed by the market as a scattershot approach.

Regardless of the outcome, I believe we're about to witness a realignment of the global trade order. The United States will be one pole. Europe a second. And BRICS a third.

That brings me back to the U.S. dollar. Remember, it's on one side of almost 90% of global foreign exchange transactions. So how will BRICS circumvent the greenback?

My bet is on bitcoin. It will be their "unconventional" weapon.

Just think about it…

Outside the U.S. dollar, there are very few countries willing to accept their trading partners' fiat currencies in exchange for goods or services.

For small transactions of a few million dollars, accepting a trade partner's currency isn't a big deal. But when it comes to multibillion-dollar trade deals, it becomes a problem.

Ethiopia doesn't want Argentina's peso in exchange for its coffee. And Argentina doesn't want Ethiopia's birr in exchange for its malbec.

Neither currency is as liquid as the U.S. dollar. So the nation accepting a trade partner's currency might lose a percentage of its value when they convert it back to their own local currency.

The percentage is small but adds up quickly over time when you apply it to nearly $29 trillion in global trade.

That's why countries need a new trade settlement asset. One that's neutral with deep liquidity and which both sides can trust.

To illustrate this, let me turn to another alternate global reserve asset: gold.

Instead of settling trades in dollars, countries could settle up in gold. Since prehistory, gold has been used as a trading commodity. And over the past decade, China and Russia have been dumping U.S. dollars for this very reason.

In 2010, Russia held $176 billion in U.S. Treasuries. Today, it holds virtually none (about $46 million). And in 2015, China held over $1.3 trillion in U.S. treasuries. Today, it holds about $761 billion – a nearly 50% decline.

Roughly over the same period, Russia and China have increased their gold holdings by 146% and 17%, respectively.

In 2023, the Atlantic Council think tank reported Russia and China had traded gold to skirt western sanctions. But there is a problem. Moving billions in gold is a logistical nightmare.

While gold eliminates counterparty risk, it's a headache for settling multibillion-dollar trade deals as Russia and China are finding out.

First, it isn't easy to move gold. $1 million in gold bars would weigh about 31 pounds. That makes it difficult to transport. Now, imagine trying to transport hundreds of billions of dollars' worth of gold.

A hundred billion worth of gold would weigh over 900 metric tons. That's over two million pounds. It would take a caravan of military vehicles to move that much weight… weeks to arrange and tens of millions of dollars in shipping and security costs.

In March, I wrote an essay about a mysterious flight that transported 40,000 pounds of gold from Caracas to Moscow. According to reports at the time, the plane carried a contingent of armed guards and was escorted to its destination by fighter jets.

Bitcoin retains all of gold's benefits, but without its weakness (like transportation and storage costs).

With just a few clicks, you can send billions of dollars to anyone in the world for roughly $1. On top of this, bitcoin has deep liquidity like the U.S. dollar. If bitcoin were classified as a "stock," it would be the most liquid stock in the world.

Bitcoin trades over $27 billion per day. By comparison the world's most widely traded stock, Apple (AAPL), trades $10-$15 billion per day. Bitcoin's liquidity, neutrality and 24-hour trading markets makes it a great trade settlement asset.

I believe gold will continue to be a great reserve asset because no nation controls it. Unlike U.S. dollars, a government can't "freeze" another nation's gold holdings. And they can't stop them from selling it to others, either.

But due to its physical nature, gold isn't a good trade settlement asset. We live in a digital age now. Trade settlement assets need to be digital… Not some antiquated analogue like gold.

That's why I believe the BRICS are turning to bitcoin. It's digital like most U.S. dollars and incredibly liquid. That makes it superior to gold when it comes to settling trades.

And I'm not just speculating here. This is already happening.

Last week, reports revealed Russia's $192 billion oil industry is using cryptocurrencies in trade with China and India to skirt Western sanctions. Russian oil companies have used Tether (USDT), bitcoin (BTC), and ether (ETH), sources say.

In the months ahead, I believe for the first time, we'll see the narrative behind bitcoin move from a store-of-value asset to a trade settlement asset.

Look, I know Russia's $192 billion industry is a drop in the bucket compared to $25 trillion in total global trade. But I believe it will have a snowball effect and the value-add effects will be MASSIVE.

As the global trade order realigns, countries will need an alternate global currency to the U.S. dollar to settle trades. In our digital age, analogues like gold just won't cut it.

Bitcoin is the only answer.

Still a Great Buy

While most investors think countries buying bitcoin and putting it on their balance sheets is the most bullish global catalyst, I think they're wrong.

That's because if a country buys bitcoin, there's a good chance it may sell it in the future when the opposing party comes into power.

Just like individual investors, it might panic sell at the lows. Or use it as a political tool.

For example, if the Trump administration buys $10 billion in bitcoin… An ensuing administration could just sell it and use the proceeds to pay for their agenda.

On top of this, the bitcoin network (and bitcoin itself) is more valuable if people are making transactions with it.

That's why bitcoin making its way to a country's balance sheet isn't the crown jewel of bitcoin adoption…

The most bullish catalyst for bitcoin is becoming the global settlement currency in place of the U.S. dollar.

But bitcoin doesn't have to be either a trade settlement asset or a store-of-value asset. It can be both.

If there's just one thing you take away from this essay, let it be this…

Bitcoin is going to be the first asset in the modern world that's both a trade settlement AND a store-of-value asset.

It's liquid and incredibly easy to move since it's digital, which is great for settling trades and gives it the best qualities of the U.S. dollar.

And like gold, it's a great store of value because it's not controlled by any single government or entity and can't be inflated away through money printing.

This is the single most bullish case for bitcoin that's just beginning to unfold… Yet no one is talking about it.

The trade war might come to an end tomorrow, but that doesn't fix the trust that has already been eroded.

Don't expect global trade to transition to the bitcoin network overnight, though. This is going to take years.

But you have to look at the facts – the wheels are already in motion. Bitcoin now has an opportunity to replace the U.S. dollar as the global settlement asset.

It's permissionless, trustless, and it can't be inflated away like the dollar system is today.

You have an opportunity to buy a stake in the future system before the masses wake up to what's happening. Don't let this opportunity go to waste.

Keep stacking bitcoin!

Houston Molnar