To most, the going-ons of the Federal Reserve and other central banks are boring. But over the past few months, as COVID-19 has shut down the world’s economy, there has been a growing spotlight on central banks.
People are starting to become concerned about whether or not these institutions can not only save the U.S. economy, but save the economy in a way that limits monetary downsides, including inflation or deflation. Bitcoin bugs, especially, have expressed their concern.
Federal Reserve Chairman’s “60 Minutes” Interview
With the increased scrutiny the public has put on central bankers over recent months, CBS’ world-famous show “60 Minutes” decided to run a segment on the Federal Reserve and its chairman, Jerome Powell.
To most, the 15-minute interview was probably innocuous and very reassuring.
Powell said in response to a question about the expectations of a V-shaped recovery that he thinks the road to recovery is near:
Well, I would say the main thing is to get back on the road to recovery. And I think that can happen relatively soon, likely to happen in the second half of the year. That’s a reasonable expectation.
The central banker also said that the trillions of dollars the Federal Reserve has already spent on injecting liquidity into different facets of the economy may be just the start of a larger wave of stimulus:
There is a lot more we can do. We’re not out of ammunition by a long shot. No, there’s, there’s really no limit to what we can do with these lending programs that we have.
Again, these soundbites were likely reassuring to the millions of Americans who are worried about losing their jobs and their businesses, but to Bitcoin investors, these soundbites were like death blows to the fiat system.
Could Send Bitcoin to Fresh Highs
Bitcoin investors were quick to champion the interview as a way to validate the cryptocurrency’s bull case.
Marty Bent, a prominent Bitcoin podcaster and commentator, said in his newsletter that Powell’s comment that the trillions worth of liquidity is simply “printed digitally” makes it clear that Bitcoin “is the answer”:
The combination of the inability for anyone to create new bitcoins out of thin air, the fact that bitcoins can be divided very granularly, transported across the Earth with ease, and protected in one’s mind is REVOLUTIONARY. The world no longer has to be subjected to poor decision making from a few men with perverse incentive.
Financial analyst Preston Pysh echoed this, saying that the reason he owns Bitcoin is “BECAUSE the Federal Reserve isn’t out of tools by a long shot.”
The reason I own #bitcoin is BECAUSE the Federal Reserve “isn’t out of tools by a long shot.”
— Preston Pysh (@PrestonPysh) May 18, 2020
It may seem as though Powell’s words are being twisted to fit a narrative, but there are prominent investors and analysts that are flocking to Bitcoin because they see it as a hedge against money printing, a hedge against central banking.
Legendary hedge fund investor Paul Tudor Jones publicly announced his support for Bitcoin after ignoring the cryptocurrency for years. The reason: he thinks that with the monetary and fiscal response to COVID-19, there’s a real risk of inflation, which warrants the need for a portfolio hedge such as Bitcoin. Unlike fiat, he explained in a research note, Bitcoin is absolutely scarce, making it likely to outperform in a world where traditional money is worth less and less.
Central-bank liquidity may restrict the equity bear, yet it’s a prime catalyst to relaunch bull markets in quasi-currencies.