US Federal Reserve Chairman Jerome Powell recently announced that the Fed will now shift its focus from targeting inflation to closing the “unemployment deficit”. The Fed is essentially doubling down on the same inflationary policies it tried during the global financial crisis of 2008.
At a recent hypothetical event in Jackson Hole, Powell said the Fed would not raise interest rates anytime soon. He also said the Fed would tolerate higher inflation, moving away from the historic 2% inflation target. This cheap money policy and high inflation are taking quantitative easing to a whole new level.
Relatives: Jerome Powell throws a US dollar under a bus in Jackson Hole
A Federal Reserve study of the Bank of Japan’s practices during the 2013 economic crisis warned that higher inflation targets could lead to “endless monetary settlement, even when real economic activity is high or the risks to financial stability increase.” In March 2013, the Bank of Japan introduced quantitative and qualitative easing of monetary policy to stimulate the Japanese economy and increase inflation.
After Powell’s speech in Jackson Hole, the dollar fell against the euro, and gold was back in the 1950s. Meanwhile, Bitcoin (BTC) is tracking itself; Ether stabilizer (ETH); And shares piled up again. However, the Fed will not be able to reverse its new policy so easily.
When governments print endless amounts of money through bailout and quantitative easing, inflation is likely to drive core prices up. Of course, the Fiat system isn’t perfect. Cryptomedia uses the threat of inflation to advertise the benefits of cryptocurrencies. Amid shrinking GDP, economic contraction, government aid, and fiscal stimulus, bitcoin and cryptocurrencies are beginning to be described as anti-inflationary hedges. the demand? You should buy bitcoin because the cryptocurrency acts as a defense against a disrupted fiat money system.
However, Bitcoin is still in its infancy. In times of economic uncertainty, investors still choose to buy safe-haven gold and stocks. In terms of gold, according to Morningstar, the S&P GSCI gold index is up 7.2% in the last three months of 2018, while the stock market is down nearly 14%. Even during the last bear market, when stocks were down 33%, the gold index was only down 2%. Then the price of gold jumped to record levels in the following months. However, gold can be volatile in two directions. About a third of fund managers participated in a survey of global fund managers at Bank of America in August 2020, where they felt that their value was overestimated.
From the head of Fidelity, who is bidding to create a new multi-billion dollar Bitcoin fund and crypto asset manager Grayscale, who reported its largest quarterly inflow of nearly $ 1 billion in history, institutional demand for bitcoin has increased amid the COVID-19 pandemic. This institutional focus shows just how seriously the big players are considering Bitcoin as an investment asset.
However, institutional money is only just starting to flow into the cryptocurrency ecosystem, and as such, the market is still relatively immature and fragmented. Cryptocurrencies take longer to grow before becoming a safe haven.
Investors today use Bitcoin as a store of value because they believe prices will rise legally. Be careful: this should not be the only intention to invest in the cryptocurrency market. If people invested in this space because the financial system collapsed, we would see unhealthy price increases followed by the collapse of the crypto index.