Dollar and Bitcoin Are Locked in Mutual Reinforcement, Not Competition

The narrative around bitcoin undermining US dollar dominance has it backwards. According to Sam Lyman, head of research at Bitcoin Policy Institute (BPI), a Washington DC-based digital asset advocacy organization, BTC and dollar-pegged stablecoins operate in a fundamentally symbiotic relationship that actually strengthens both.

"Bitcoin is beneficial to the US system because the largest Bitcoin trading pair is BTC/USD," Lyman told Cointelegraph, referencing Tether's USDT stablecoin backed by cash deposits and short-term US government debt. The implication is clear: when crypto trading volume explodes, it flows through dollar rails first.

The Petrodollar Precedent

Lyman drew a direct parallel between bitcoin's dollar dominance and the petrodollar system established in the early 1970s. Just as international oil sales priced in dollars created perpetual currency demand, BTC/USD trading pairs drive recurring dollar liquidity needs. "There is a symbiotic relationship between BTC and the dollar system because BTC is most frequently traded in dollars," he explained. "So, I do see those things as being mutually reinforcing, which runs contrary to the narrative around BTC that it would actually undermine the dollar."

Market data backs this thesis. US dollar-based trading pairs continue to dominate bitcoin markets in 2024, with crypto analysis platforms confirming dollar stablecoins remain the primary trading vehicle for BTC portfolio management globally.

This dynamic has direct geopolitical implications. Lyman urged US lawmakers to continue developing stablecoin regulations through the GENIUS regulatory framework—without diluting core principles—to protect dollar hegemony and maintain competitive positioning in the broader crypto intelligence landscape.

Why China Fears Permissionless Crypto

The Chinese government's repeated crackdowns on bitcoin and stablecoins reveal the inverse logic. Beijing has "banned" both assets multiple times not because they're irrelevant, but because they represent "a tremendous threat" to China's capital controls—the economic foundation the state depends on.

"The entire Chinese economy depends on capital controls. China is able to keep money within the country by preventing its elite from moving money out of the country," Lyman noted. This explains why China reaffirmed its stablecoin ban in 2025, pivoting instead toward its digital yuan—a yield-bearing central bank digital currency (CBDC) designed to maintain full government control over capital flows and capture foreign exchange market share.

CBDCs operate as fully programmable instruments, giving central banks granular control impossible with permissionless blockchain technology.