Bitcoin’s reaction to the global market crash has so far been unsurprisingly negative, but with the US now embarking on a huge financial stimulus program, some prominent voices are calling for Bitcoin to rise up as the ultimate non-governmental asset.
When in Doubt, Print More Money
US Treasury Secretary Steve Mnuchin’s claim last week that the Treasury and the Federal Reserve were working towards providing “unlimited liquidity” for troubled businesses and households during the current downturn sent shockwaves through the financial sector, and reinforced once more just how much of a runaway train fiat money has become.
In response to this, some Bitcoin supporters have professed that his endeavor marks a turning point in the importance of Bitcoin as a deflationary asset unconnected to any governing agency:
Treasury Secretary Mnuchin just said the Federal Reserve and Treasury are working to provide “unlimited liquidity” to the financial system.
This is going to be the greatest monetary stimulus experiment in history.
Bitcoin was built for this.
— Pomp ? (@APompliano) March 13, 2020
“Fed and Treasury are working to provide unlimited liquidity”
Unlimited liquidity means unlimited inflation: The Fed and US Government are blatantly stating they will steal whatever is necessary to keep fiat currency pyramid scheme going.
— ?Robert Breedlove (@Breedlove22) March 14, 2020
I can not express how bullish I am on bitcoin. We are at risk of losing the entire system right now. I know they will find a way to save it but all trust is lost.
Gold guys/girls – you’ll be fine too. It’s just that $BTC has bigger upside, by far but is riskier than gold
— Raoul Pal (@RaoulGMI) March 19, 2020
Where else can you find yield after deleverage runs course. Stocks uncertain. Cash? huge QE inflation coming. Yields approx 0% but inflation adjusted -ve. Few projects as discretionary spend off 3-6 mo. Bitcoin is basically fully disconnected from real economy. And asymmetric bet
— Adam Back (@adam3us) March 18, 2020
Is the Balloon About to Pop?
It is a natural response in times like this to print more money, for a number of reasons – firstly, it calms investors’ and banks’ nerves, and secondly it helps to physically shore up companies at the risk of going bust. However, the printing of money is a delicate balance, a yin and yang between money printing and adjusting inflation to make sure the balloon doesn’t fly so far away that it pops.
It is this popping of the balloon that critics of the “unlimited liquidity” method are concerned about. Currently, investors are running from equities and commodities into cash, resulting in the US dollar lording it over all other currencies.
This has only stoked fears of a global credit crunch, which in turn leads to further selling of stocks and other assets, with even traditional safe havens such as gold and US Treasuries suddenly coming under pressure. That in turn adds to demand for dollars, creating a vicious loop.
Bitcoin Solves This
Bitcoin, on the other hand, has certain advantages over fiat currencies that many either don’t understand or choose to ignore. Simply put, it cannot be printed ad nauseum to prop up a failing system – it has set rules for when and how much can be released into the system in order to avoid abuse.
This is the opposite of the dollar, which is on the verge of being printed, and therefore debased, in quantities we have never seen before.
Not Everyone is Buying It (Literally)
Not everyone is convinced that Bitcoin’s time has come however:
In current macro, only “Decoupling” will makes bitcoin attractive to whoever still get cash in hand for “investments”, instead of a acting as a higher beta SPX, most cash are on the sideline or shorting
— Dovey 以德服人 Wan ?? (@DoveyWan) March 19, 2020
This is an understandable point of view given that Bitcoin is still an unknown quantity among most investors and, for very sensible reasons, is not to be trusted during a financial apocalypse.
When we emerge from the other side however, Bitcoin should still be around, which will hopefully lead to more of the population taking the chance to at least explore it and learn about why it is the perfect antidote to the government money printing machine.