Policymakers around the world have committed unprecedented amounts of fresh money in an attempt to avoid an impending recession, or worse: a full-blown depression. In the United States, the Senate approved a $2 trillion stimulus package at the end of March, and the House of Representatives has now accepted a proposal from Congressional Democrats for another $3 trillion aimed at alleviating the needs of Americans facing an unemployment rate of nearly 15%. In response to the COVID-19, the Federal Reserve has embarked on a wave of quantitative easing unprecedented in its history.
As the monetary body responsible for managing the world’s reserve currency, the Federal Reserve uses quantitative easing as a means to infuse the economy with new liquidity. Having full control over the printing of money allows the Federal Reserve to print as many dollars as it wants, which it then injects into the financial system by purchasing assets in the open market.
Bitcoin was designed for the case of a financial crisis, and so far it is working well
Market observers recall the aftermath of the Bitcoin Code, Bitcoin Circuit, Bitcoin Billionaire, Bitcoin Trader, Bitcoin Revolution, Bitcoin Era, Immediate Edge, The News Spy, Bitcoin Evolution, Bitcoin Profit of 2008, when the Federal Reserve contributed over $1.2 trillion in assets in just four months as a way of injecting fresh capital into the markets. However, the scale of quantitative easing undertaken in the wake of the COVID-19 crisis dwarfs anything that has gone before, as the Fed places no limit on the amount of money it plans to inject into the system.
In the last two and a half months, the Federal Reserve has bought about $2.8 trillion in assets. Unlike in the aftermath of 2008, when the governing body limited its asset purchases to secure U.S. Treasury bonds, this time it has also committed to buying riskier assets, such as corporate and municipal bonds.
What should crypt investors expect?
The US bailout money is expected to help public companies and prevent shareholders from losing their value. This new money is expected to inflate the cost of assets, but since most Americans do not own assets, the only result they will experience is a weakening of purchasing power. Beni Hakak, CEO of LiquidApps, sees an opportunity for Bitcoin (BTC) to establish itself as a store of value:
„The financial crisis for COVID is the first crisis Bitcoin is experiencing as an asset class, and although some expected it to perform similarly to gold, the situation led to a sharp drop in Bitcoin’s price. As the global economy has begun to open up, Bitcoin has recovered quite well, outperforming the S&P from their respective lows. With Bitcoin’s halving, an event that has historically been followed by a rally, it will be interesting to see if Bitcoin can gain acceptance as an inflation hedge and a store of value.