What Happens When a World Reserve Currency Declines - And How to Protect Your Wealth
Dating back to the 1400s, world reserve currencies - those most used in global trade, finance, and central bank reserves - have lasted an average of roughly 100 years. None hold that status forever, and each transition has reshaped global economics, politics, and markets.
The U.S. dollar has been dominant for about 105 years, and some believe it may be entering its final chapter of prominence as domestic debt levels climb, geopolitical tensions rise, and de-dollarization accelerates globally. In 2020 alone, U.S. debt surpassed 125% of GDP and Treasury issuance reached record levels. These shifts suggest the next monetary era may already be quietly forming. If true, what might the next 10-30 years look like, and how should investors position their wealth?
A Brief History of Reserve Currencies
Over the past six centuries, the world has cycled through several reserve currencies:
Era
1400–1530
1530–1640
1640–1720
1720–1815
1815–1920
1920–present
Dominant Reserve Currency
Portuguese real
Spanish silver real
Dutch guilder
French livre/franc
British pound sterling
U.S. dollar
Approx. Duration
~110 years
~110 years
~80 years
~95 years
~105 years
~105 years so far
The durations in the table are often rounded from historical estimates rather than strict arithmetic from the dates. Most historians use approximate lengths because the start and end points of a reserve currency’s dominance aren’t cleanly defined. There’s a gradual rise before “official” dominance and a lingering tail after displacement.
Are We in the Early Stages of Dollar Decline?
The fall of a reserve currency is rarely sudden. It’s typically a drawn-out process marked by increasing debt burdens, monetary debasement, geopolitical fragmentation, and erosion of trade dominance. For the U.S., the early signs appeared after the 2008 financial crisis, when unprecedented monetary stimulus became the norm. The pace accelerated in 2020 with pandemic-related spending, rising deficits, and a visible shift in global trade settlement toward alternative currencies.
If history repeats, the dollar may be 15 years into its decline phase, similar to the British pound’s slow retreat from dominance after World War I. And while that sounds abstract, its effects are already visible in everyday life. A declining reserve currency doesn’t just show up in bond yields - it shows up at the grocery store, in housing affordability, wealth inequality, political divide and in the real value of your savings.
Lessons from the British Pound’s Fall
The pound’s story offers valuable perspective. At its peak in the 19th century, sterling dominated world trade and finance. But after WWI, the UK’s massive debts, loss of colonies, and geopolitical shifts began to erode its influence. The transition to the U.S. dollar as the primary reserve currency took several decades, with the formal handover cemented at Bretton Woods in 1944.
During that transition, British investors experienced inflation, currency depreciation, and shifts in asset performance - trends that echo what could lie ahead for USD-based portfolios.
Impact on U.S. Assets
Different asset classes respond differently to a declining reserve currency. Government bonds often hold up in the early years as foreign investors still view them as safe. But as confidence fades, yields must rise to attract buyers, and inflation erodes real returns. Stocks benefit initially from a weaker currency, which boosts export competitiveness, but higher interest rates and foreign capital outflows eventually weigh on valuations. Real estate tends to rise in nominal terms, especially in desirable locations, but high borrowing costs can cool certain markets.
The common thread is that nominal gains often disguise real (inflation-adjusted) losses. Investors anchored only to dollar-based measures risk overestimating their true returns. When a currency is rapidly debasing, it appears that the stock market and housing market are soaring, however this is only because they are measured in the debasing currency.
Over time, the dollar’s share of global reserves may gradually decline as the world becomes more multipolar - meaning economic power and trade are increasingly distributed across several major regions rather than centered on one. Yet the dollar will likely remain a core pillar of global finance for decades to come. Its network effects, liquidity, and trust infrastructure are unparalleled - advantages that don’t disappear quickly. Therefore, investors should think in terms of long-term adjustment, not sudden collapse.
The Emerging Role of Bitcoin and Other Hard Assets
Past reserve shifts lacked a truly neutral, decentralized settlement asset. Today, Bitcoin offers a new alternative: borderless, fixed in supply, and increasingly adopted by institutions and even sovereign states. It is nowhere near large or established enough yet to replace the dollar, but it could operate in parallel. It will most likely serve as a store of value, neutral reserve asset, and settlement layer in a multipolar system. Scaling solutions like the Lightning Network are making Bitcoin faster and far more cost-efficient to transact, which strengthens its case for a larger role in global finance.
A 20- to 30-Year Playbook
Positioning for a potential reserve currency transition means thinking in real terms, not just nominal gains. This starts with reducing dependence on USD-only assets, adding exposure to foreign markets, and incorporating scarce, durable stores of value like Bitcoin, gold, and high-quality real estate (properties in supply-constrained areas with lasting demand or unique intrinsic value). Bonds should be kept short in duration to limit interest rate and inflation risk. Equity exposure should lean toward multinational companies with pricing power and essential goods or services, alongside select emerging markets that stand to benefit from de-dollarization.
What to Avoid
In the late stages of reserve currency dominance, some strategies tend to destroy purchasing power. Long-term fixed-dollar bonds are high on that list, as are over-leveraged positions that could be wiped out by rate spikes. Concentrating all assets in one jurisdiction invites political and currency risk. And waiting too long to accumulate hard assets often means buying at increased prices after the shift is already underway.
Final Thoughts
The end of a reserve currency’s dominance isn’t the end of the world - it’s a slow transition. History shows it rewards those who positioned early, diversified globally, and focused on real purchasing power over nominal returns.
If the dollar is indeed following the historical pattern, we are still in the early innings. But these transitions are easiest to navigate before the turning point becomes obvious. In the decades ahead, investors who combine traditional assets with strategic allocations to scarce, hard assets like gold and Bitcoin will likely be best positioned to preserve and grow their wealth.
At Citrine, we continually evaluate these macro shifts - from Bitcoin’s growing role to changes in global capital flows - and integrate them into our long-term planning and portfolio strategy.
About The Author
Jirayr Kembikian, CFP® is a wealth advisor, managing director and co-founder of Citrine Capital, a San Francisco-based wealth management and tax preparation firm serving tech professionals, founders, and business owners. He specializes in navigating the complexities of equity compensation, private investments, and Bitcoin wealth strategies. With over a decade of experience guiding clients through liquidity events and complex financial decisions, Jirayr brings a grounded yet forward-thinking perspective to building and preserving wealth.