The global forex exchange rate between the euro (EUU) and the US dollar has reached parity — meaning the two currencies are worth the same, for the first time in 20 years, the euro hit $1 on Tuesday, down about 12% since the start of the year.
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BitMEX co-founder Arthur Hayes said that the euro’s slide was a sign that Bitcoin could hit $1 million by the end of the decade.
The declining value of fiat currencies like the euro has long been a point of discussion in crypto circles. Bitcoin was famously born out of the 2008 Global Financial Crisis; its pseudonymous creator Satoshi Nakamoto said that it was a response to central bank incompetency. As Bitcoin has a fixed supply of 21 million coins, crypto enthusiasts often describe it as a “hard money” alternative to traditional currencies. Many of crypto’s most ardent followers believe that fiat currencies are destined to fail on a long-term time horizon because they are designed to inflate. BitMEX co-founder Arthur Hayes memorably commented on the issue in an April blog post, saying that Bitcoin would hit a price of $1 million by 2030. He reaffirmed his bold prediction as the euro crashed Tuesday, arguing that the downturn was the first sign of a so-called “Doom Loop” in which central banks turn to yield curve control as fiat currencies start to collapse. “But please be patient, these things take time,” he added.
Fears of recession on the continent abound, stoked by high inflation and energy supply uncertainty caused by Russia’s invasion of Ukraine.
The European Union, which received roughly 40% of its gas through Russian pipelines before the war, is attempting to reduce its dependence on Russian oil and gas. At the same, Russia has throttled back gas supplies to some EU countries and recently cut the flow in the Nord Stream pipeline to Germany by 60%.
The energy crisis comes alongside an economic slowdown, which has cast doubts over whether the European Central Bank can adequately tighten policy to bring down inflation. The ECB announced that it will hike interest rates this month for the first time since 2011, as the eurozone inflation rate sits at 8.6%.
But some say the ECB is far behind the curve, and that a hard landing is all but inevitable. Germany recorded its first trade deficit in goods since 1991 last week as fuel prices and general supply chain chaos significantly increased the price of imports.
This safe haven retreat into the US dollar could become even more extreme if Europe and the US enters a recession, warned Deutsche Global Head of FX Research George Saravelos in a note last week.