The collapse of the dollar hegemony? The wave of de-dollarization is coming.

Question

Recently, there has been a lot of buzz in the international financial circle about a phenomenon that has drawn attention: global de-dollarization. In simple terms, it means that countries are reducing their dependence on the US dollar and starting to look for alternatives.

Why has there been a sudden reversal against the US dollar?

The root cause is very heartbreaking—the United States uses the dollar as a weapon. Sanctions against Russia and the trade war with China have made many countries realize that putting all their eggs in the dollar basket is too dangerous. From Russia clearing its dollar foreign exchange reserves in 2021 to the recent preparations by the BRICS nations (Brazil, Russia, India, China, South Africa) to bypass the dollar with a new system, the signal is very clear—countries need to band together for warmth.

How did the US dollar become the world's hard currency?

The status of the US dollar is not something that came out of thin air. In 1944, the Bretton Woods system was established, with 44 countries agreeing to peg their currencies to the dollar, which was also pegged to gold. This directly brought the dollar to the world stage. Coupled with the fact that after World War II, the United States held most of the world's gold and had the strongest economic position, the dollar thus took the top seat.

Even after the collapse of the Bretton Woods system in the 1970s, the US dollar still firmly holds its position as the global reserve currency—data from the International Monetary Fund shows that the dollar accounts for 57% of foreign exchange reserves. Why? Because oil and commodities are settled in dollars (“petrodollars”), which is the moat of dollar hegemony.

The Three Major Strategies for De-dollarization

1. Central Bank Crazy Accumulating Gold

In recent years, gold purchases by countries such as China, Russia, and India have reached the highest level recorded since 1950. Gold is quietly usurping power from the US dollar—it is being treated as a true “hard asset.” Some analysts point out that while Chinese officials claim to have stopped buying gold for 6 months, import and export data from London and Switzerland reveal the truth, indicating that the actual purchase volume may be ten times what was claimed.

2. The Rise of the Petro Yuan

As the world's largest oil importer, China has launched a crude oil futures benchmark priced in yuan. This directly challenges the traditional “petrodollar” system, making it clear: oil can also be purchased with yuan.

3. Bilateral Currency Swap + Local Currency Settlement

China has even directly issued dollar bonds in Saudi Arabia to compete with U.S. Treasury bonds, aiming to direct these funds to BRICS countries instead of flowing back to the United States. This is a new way to confront the U.S. within a parallel system.

What does it mean for investors?

Is there a real problem - Will the status of the US dollar really be shaken?

Expert opinions are polarized:

Optimists: Canadian businessman Frank Giustra believes that de-dollarization is an inevitable trend, and that it has become normal for countries to trade bypassing the US dollar.

Cautious Dispatch: Macro investor Alfonso Peccatiello pours cold water — historically, changes in monetary systems are often accompanied by geopolitical upheaval and even war. He believes the probability of a smooth transition is very low.

There is another concern: if the U.S. dollar loses its status as a reserve currency, it could trigger domestic inflation and economic instability in the United States, which is not only a financial issue but also a national security issue.

Investment Layout

Instead of worrying about whether the dollar will collapse, it's better to prepare for the transitional period:

Diversify investments in various currencies and assets (Euros, Japanese Yen, Renminbi, etc.)
Configure hard assets such as gold
Follow the development of cryptocurrencies and other borderless payment tools.
Research on circumventing the dollar-based regional payment system

The process of reshaping the financial order will be long, but the signal is already clear—diversified reserves and risk diversification are the way to go.