TL;DR
- Bitwise CIO Matt Hougan warns that the fiat money system is no longer perceived as stable by many investors.
- Central banks are shifting toward gold to hedge against currency debasement, while individuals are increasingly adopting bitcoin as a digital alternative.
- With inflation concerns rising and trust in government-issued currencies fading, bitcoin is emerging as a modern store of value.
As global financial conditions continue to evolve, more investors are rethinking long-standing assumptions about money itself. Bitwise Chief Investment Officer Matt Hougan believes the world is starting to question the foundations of the fiat currency system, an experiment that has defined modern economics since the early 1970s. In his recent memo, Hougan compares fiat money to water, so omnipresent that most people never stop to consider what it really is.
Hougan argues that fiat currency, which lacks a tangible backing like gold or silver, is losing its status as the default monetary framework. Since the United States abandoned the gold standard in 1971, global monetary supply has been dictated almost entirely by central bank policy. That shift, once viewed as progress, is now being scrutinized more than ever.
Central Banks Bet On Gold, While Individuals Embrace Bitcoin
Recent data highlights a sharp increase in gold purchases by central banks, particularly since the 2008 financial crisis. That trend accelerated following geopolitical tensions, especially after the 2022 Russian invasion of Ukraine. These institutions are seeking more stable, seizure-resistant assets to protect reserves from both inflation and political risk. Gold recently surpassed the euro to become the second-largest reserve asset globally.
Meanwhile, retail investors are turning to bitcoin as their hedge of choice. With properties similar to gold—scarcity, decentralization, and immunity to political manipulation—bitcoin offers a modern alternative that aligns with the digital age. Bitcoin exchange-traded funds (ETFs) have attracted over $45 billion in inflows since 2024, outpacing gold ETFs by a significant margin.
Growing Awareness Of Fiat’s Limitations Is Fueling Change
Hougan believes that more people are waking up to the risks associated with limitless money printing and unchecked monetary expansion. Traditional investment strategies relying heavily on fiat-based assets like stocks and bonds may no longer offer the protection they once did. Both individuals and institutions are seeking alternatives that preserve value in a world of growing debt and financial uncertainty.
Bitcoin, still small relative to gold and global equities, may not yet attract central bank adoption, but its momentum is undeniable. As faith in fiat weakens, the demand for scarce, independent financial assets is only expected to grow.
