3 Cryptocurrencies to Buy if You're Worried About the Dollar Losing Value

With the CBO projecting persistently large deficits that could push U.S. federal debt toward roughly 150% of GDP, the article argues the dollar is likely to weaken and investors should seek portfolio protection. It highlights three crypto assets as potential hedges: Bitcoin (21 million cap; >93% mined, ~1.3 million remaining; subject to ~halving-driven supply declines but high volatility including potential 70% drawdowns), Zcash (21 million cap with Bitcoin-like issuance but higher regulatory and liquidity risk due to optional privacy via zk-SNARKs), and Ethereum (dynamic scarcity from fee-burning plus staking that can yield roughly 3–4% annually).

Analysis

Market structure: A persistently weakening USD and rising sovereign deficits favor scarce, non-fiat stores (Bitcoin, gold) and real-asset proxies. Bitcoin (fixed 21M issuance) and periodically deflationary Ethereum (EIP-1559 burns + staking) gain structural tailwinds versus cash and long-duration Treasuries; privacy coins like Zcash face fragmented liquidity because of regulatory risk. Expect higher realized vol (VX-like) and widening basis between spot crypto and regulated futures/ETF pricing over 3–12 months.

Risk assessment: Tail risks include abrupt regulatory bans on privacy coins (ZEC) or exchange custody failures, and macro liquidity shocks that can flash-crash BTC by 50–70% in days. Immediate (days) is dominated by news-driven spikes; short-term (weeks–months) reacts to Fed/dollar cues and ETF flows; long-term (years) is driven by fiscal trajectory and persistent CPI above 3%. Hidden dependencies: crypto’s hedge effectiveness is correlated to risk appetite and USD funding liquidity, not just inflation expectations.

Trade implications: Tactical allocation: favor spot BTC (long) and ETH (stake/long) while underweighting ZEC; fund by trimming cash and shortening duration (10Y exposure). Use options to buy cheap convexity: buy 3–6 month BTC/ETH call spreads on pullbacks and protective puts on miner equities (RIOT, MARA) if leverage is used. Rotate 2–5% of portfolio into GLD/commodity real assets within 30 days to diversify dollar risk.

Contrarian angles: Consensus assumes crypto always rises with inflation; instead expect episodic decoupling—crypto can dump in poor liquidity even as CPI climbs. The market may have already priced a weaker dollar into BTC; mispricings likely in small-cap privacy coins (ZEC cheap for reasons beyond scarcity). If regulators clarify privacy-coin legality positively in 60–120 days, ZEC could rerate; conversely, aggressive enforcement would permanently impair liquidity.

Key Decisions for Investors

• Establish a 3% strategic long position in Bitcoin spot (or spot-backed ETF) over 60 days: tranche 1% now, +1% at a -15% drawdown, +1% at -30%; take profits to rebalance if BTC gains +100% from entry or cut exposure to 1% if price falls 40% from average entry.
• Allocate 2% to Ethereum via staking with a reputable custodian (Coinbase/Lido) for a target net yield of ~3–4% APR; review position at 6 months and exit if staking yield <2% or net issuance becomes positive for two consecutive months.
• Avoid establishing long exposure to Zcash; instead initiate a small 0.5% synthetic short (via futures or CFDs where legal) to hedge privacy-coin regulatory risk—close or flip to flat if major exchanges maintain listings and no enforcement action appears within 60 days.
• Reduce portfolio duration: trim 25% of 10-year Treasury ETF (TLT) exposure within 30 days and redeploy proceeds 2% to GLD and 2% to crypto positions (BTC/ETH). Use 3–6 month BTC/ETH call spreads (buy ATM, sell 1.5x OTM) sized to keep total option premium ≤0.5% of portfolio for convex upside with limited downside.