Bitcoin: Decentralized Digital Gold
Bitcoin is a groundbreaking decentralized digital currency that operates on a blockchain network, free from the control of any central bank or government. Its total supply is strictly capped at 21 million coins, with this scarcity being central to its value proposition. Initially designed as a peer-to-peer electronic cash system, Bitcoin has gradually been embraced by the market as a significant investment tool and a "digital gold"-like store of value, albeit with considerable price volatility.
Historically, Bitcoin and the DXY (US Dollar Index) often exhibited an inverse relationship, stemming from Bitcoin's decentralized nature contrasting with the centralized US dollar. For instance, the Federal Reserve's loose monetary policy might weaken the DXY, but the increased market liquidity could simultaneously drive funds into high-risk or inflation-hedging assets, including Bitcoin. However, this traditional negative correlation is weakening. JPMorgan Chase noted in a March 2026 analysis that, for the first time since 2014, the correlation between Bitcoin and the US dollar turned positive, potentially signaling a fundamental shift in market structure. Data as of September 2026 also shows a low correlation between Bitcoin and the DXY, with a stronger dollar explaining only about 17% of Bitcoin's daily return changes, while other factors drive the majority.
Libra (Diem): An Unfinished Stablecoin Attempt
Libra (later renamed Diem) was an ambitious digital currency project spearheaded by Facebook (now Meta) in 2019. Its initial vision was to build a simple, borderless currency and financial infrastructure to serve billions of people globally. The project initially planned to anchor its value to a basket of sovereign currencies (including the US dollar, Euro, Japanese Yen, British Pound, Singapore Dollar, etc.) as reserve assets to maintain price stability, avoiding the sharp fluctuations seen in Bitcoin, and aiming to improve the efficiency of cross-border payments and remittances.
However, the Libra project faced strong global opposition from regulators, particularly in the United States. In response to immense regulatory pressure, the Libra project underwent significant adjustments. In its 2.0 whitepaper released in April 2020, Libra (renamed Diem) shifted its focus from anchoring to a basket of currencies to issuing single-currency stablecoins, initially potentially only pegged to the US dollar. Despite these compromises, the Diem Association ultimately sold its assets in January 2022, formally terminating the project, primarily due to persistent regulatory hurdles.
Libra initially included the US dollar in its reserve asset basket, and later shifted to a single US dollar peg. Some analyses suggested that this transformation made it more akin to a digital extension of the US dollar rather than a truly global, supranational digital currency. Libra's emergence was once seen as a potential challenge to traditional fiat currencies and central banks' seigniorage. Unlike Bitcoin's fully decentralized nature, Libra (Diem) was designed as a permissioned, relatively centralized network managed by the Libra Association and relying on trusted issuers to manage reserve assets. Libra aimed to provide a stable payment instrument, while Bitcoin was more often viewed as a store of value and speculative asset.
The US Dollar: Cornerstone of the Global Financial System
The US dollar is the legal tender of the United States and the world's most important reserve currency. According to historical data, as of Q2 2025, the US dollar accounted for approximately 56.32% of global official foreign exchange reserves. Over 60% of international trade and commodities (such as oil and gold) are settled in US dollars, and its participation rate in global foreign exchange market transactions reached 88.5% (according to BIS data from 2022). In times of economic uncertainty or geopolitical turmoil, the US dollar is often considered a global "safe-haven" asset, attracting capital inflows.
The US dollar is controlled by the Federal Reserve, and its monetary policy has a profound impact on the global economy and financial markets. The economic strength of the United States and the widespread use of the US dollar in international trade and finance have solidified its irreplaceable position in the global financial system. Although the US dollar remains dominant, its share in global foreign exchange reserves is gradually declining, with a rise in the proportion of non-traditional reserve currencies. Some institutions have called for replacing the US dollar as the global reserve currency to achieve better global financial stability.
Analyzing the Relationship Between the Three: Paradigms, Extensions, and Competition
Bitcoin and the US dollar represent two distinct monetary paradigms: Bitcoin is a decentralized digital asset challenging the traditional financial system, while the US dollar is a centralized fiat currency, the cornerstone of the global financial system. They typically exhibit an inverse relationship in the market, but this traditional correlation has recently weakened or even turned positive, indicating changing market dynamics.
The Libra project, on the other hand, attempted to provide a global stable digital currency within the existing financial system framework by pegging to fiat currencies like the US dollar. However, under regulatory pressure, its direction shifted towards a single US dollar stablecoin, making it more like a digital extension of the US dollar rather than a fully independent supranational currency, ultimately failing due to regulatory hurdles.
The US dollar, as the cornerstone of the global financial system, faces challenges from decentralized cryptocurrencies (like Bitcoin) and stablecoins that once sought to establish new payment systems (like Libra). Bitcoin represents disruptive innovation to the existing financial system, while Libra sought a digitized global payment solution within the existing framework. Together, the three reflect different directions and complexities in the evolution of currency in the digital age, as well as the coexistence and competitive relationship between traditional finance and emerging digital assets.
