In the wake of the coronavirus, governments around the world have seized the opportunity to print money and bail out huge sectors of the economy. Canada, the UK, and notably the US have all passed rescue packages, and likely more can be expected in the future.
The Folly of Fiat Policy
Printing up a bunch of fiat fun bucks and handing them out might seem like a good idea, but it surely does one thing: debases the value of all the existing, circulating currency. A 2.2 trillion dollar package is worth around 10% of the country’s GDP. And the majority of the money isn’t headed for taxpayers, but rather industries and various pork pie projects.
Meanwhile, Bitcoin is effecting a slow recovery, having surpassed the $7,200 mark at time of writing.
— michael (@cornoisseur) April 9, 2020
The money printing of fiat authorities is bound to have an effect on crypto markets, and likely a positive one. Although initially the coronavirus seems to have tanked Bitcoin and everything else, now in recovery mode we see an opportunity for growth. As fiat values go down, the value of crypto will have to go up in tandem, at least to account for the overall loss in value of fiat currency.
One thing to note is that virtually all currencies will be taking a hit at the same time, so FOREX markets aren’t likely to see much of a change. Although, whoever prints the most does the most debasing, and so far that might be the United States.
As we see in the tweet above, the money printing comes in various ways.
Bitcoin Thrives in a Sea of Inflation
— Tudor Holotescu (@Tudor_Holotescu) April 9, 2020
Trump is already talking about reopening the economy, thankfully. While some in the media are overly alarmed about coronavirus, this reporter lives in a county where there hasn’t even been a case yet at time of writing. Most would like to see the economy get back to work, as governors across the United States have ordered their citizens to stay home.
But people are likely to be working for dollars that have less spending power once they do get back to work. Wages will end up being increased, and inflation will ensue. This can be expected in a fiat economy, and it’s really nothing to worry about. We’ve been seeing inflation for years. Consider how in less than 20 years minimum wages have had to nearly double across the board. These wages are set by states in response to the cost of living, and they rarely cover it. But as we can see, the cost of living must have increased a corresponding amount. Certainly no one’s raising minimum wages just to help lower income workers.
Yet Bitcoin marches on.
Although crypto markets responded to coronavirus in as extreme a fashion as Wall Street did, they’re likely to perform differently against the backdrop of sharp inflation and continued cash infusions. People want a hedge against inflationary currency, and perhaps the only best one around is Bitcoin, followed by Bitcoin Cash.
Some cryptocurrencies have their own form of inflation, like Monero, but it’s controlled and intended to encourage mining.
Bitcoin marches on, and as the economy finds its footing amidst a flood of newly printed notes, we’re likely to see adoption as people look for a life raft.