A recent report by Fidelity Digital Assets, a subsidiary of Fidelity Investments, provides “an overview of the structure of the existing global monetary system and perspective on how the past several weeks may have driven us closer to an era in which more people start to consider bitcoin as insurance, or a hedge, on the existing monetary system.”

On 15 October 2018, Fidelity Investments, which one of the world’s largest financial services providers with roughly $9.9 trillion in client assets (as of 30 June 2022), announced the launch of a new company, Fidelity Digital Asset Services, which would offer “enterprise-quality custody and trade execution services” for cryptocurrencies to institutional investors (such as “hedge funds, family offices and market intermediaries”).

Abigail P. Johnson, Chairman and CEO of Fidelity Investments, had this to say about this new subsidiary back then:

Our goal is to make digitally-native assets, such as bitcoin, more accessible to investors. We expect to continue investing and experimenting, over the long-term, with ways to make this emerging asset class easier for our clients to understand and use.

And Tom Jessop, President of Fidelity Digital Assets, stated:

We started exploring blockchain and digital assets several years ago, and those efforts have been successful in helping us understand and advance our thinking around cryptocurrencies. The creation of Fidelity Digital Assets is the first step in a long-term vision to create a full-service enterprise-grade platform for digital assets.

Anyway, on October 10, Fidelity Digital Assets published a research report titled “The Rising Dollar and Bitcoin”.

Here is a summary:

… bitcoin may soon stand in stark contrast to the path that the rest of the world and fiat currencies may take – namely the path of increased supply, additional currency creation, and central bank balance sheet expansion.

The United Kingdom is the latest example of the current predicament world governments and central banks find themselves in; wanting to revive faltering economies and struggling economic growth with fiscal tools, with a central bank that is tightening to try to fight decades-high inflation, but then encountering market stress that requires more liquidity to tamp down financial volatility and keep it from spreading.

Some U.K. investors or traders may have already noticed bitcoin’s potential to opt out of the current situation as trading volumes between the British pound and bitcoin spiked to a record high.

“... the strengthening U.S. dollar is wreaking havoc among other countries and may put pressure on the Federal Reserve to soon reverse its tightening monetary actions, something that has precedent based on 1985’s Plaza Accord. Additionally, more monetary debasement may be needed to alleviate the high debt load among developed economies, while recent events in the United Kingdom have shown counterparty and liability risks in the system, making monetary intervention and doses of liquidity features that are not likely to go away any time soon.

Comparatively, bitcoin remains one of the few assets that does not correspond to another person’s liability, has no counterparty risk, and has a supply schedule that cannot be changed. Whether those properties begin to look more attractive is ultimately up to investors and the market to decide.

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