It’s been the fastest turnaround in stock market history; after setting an all-time high in February, American equities have started a precipitous decline that has seen them drop 30% from their high in four weeks.
This record drop comes in response to fears that global economies are entering recession (or maybe something worse) as a result of the spread of the coronavirus-caused illness COVID-19, which while not decisively fatal has forced governments to turn cities (like New York, Venice, Berlin, Los Angeles, etc.) into quarantine zones, ending a majority of economic activity.
Furthermore, a crisis in the oil industry, which is arguably the backbone of the global economy, has further driven economic activity into the ground.
Due to this double-shock, central banks and governments have been forced to react with literal trillions of dollars worth of economic stimulus. Each dollar being printed, both traditional and crypto analysts have said, only helps Bitcoin gain strength.
Free Money!
In a historic press conference on Tuesday morning, the White House, specifically President Trump and Secretary Treasury Steven Mnuchin announced emergency measures to help save (bail-out) the economy.
Proposed measures, which need to be passed through political bodies, include the sending of cheques to every American — what many have dubbed “Helicopter Money” — to help cover the cost of living while unemployment rises and billions of dollars worth of small business loans and “stabilization funds.”
These measures are likely to be implemented, with both sides of the aisle (for once) eagerly supporting the calls for the introduction of these massive stimulus projects.
Anything In Their Power
The White House’s decision to activate Helicopter Money protocol comes after trillions of (proposed) printing from the Federal Reserve, which is seemingly doing anything in its power to prevent collapse. Over the past few days, the American central bank has announced the following efforts:
- $700 billion in large-scale asset purchases, open market operations, quantitative easing, or whatever you want to call it; $200 million of mortgage-backed securities and $500 billion in Treasuries will be purchased by the Fed.
- An abolishment to reserve requirements: banks don’t need to hold any of your money on-hand.
- An emergency policy interest rate cut of one whole percent, 100 basis points.
- The purchasing of “commercial paper” to ensure that businesses, especially small-size ones, have the ability to stay afloat and not bankrupt themselves amid these trying times.
- Oh right, and to put a cherry on top: as of Mar. 17, $1 trillion of daily injections into the repo (overnight lending) market.
Decisively Bullish for Bitcoin
To prevent a collapse in civilization, many analysts have agreed that these fiscal and monetary measures are necessary.
BitMEX’s research team released a report Tuesday on the matter of fiscal and monetary stimulus in this macro environment. They concluded that while they can’t predict when it will come, there will be an inflationary shock potentially on the levels of the 1970s (7% to 15% inflation per annum) that will change the economic paradigm as a result of the stimulus.
They wrote that this will only help Bitcoin:
In our view, in this changed economic regime, where the economy and financial markets are set loose, with no significant anchor at all, not even inflation targeting, it could be the biggest opportunity Bitcoin has seen, in its short lifetime.
On the side of traditional analysts, Henny Sender, chief correspondent of the Financial Times, wrote on a column last year that in devaluing currencies through low-interest rates and the printing of money in other ways, central banks are “driving demand for Bitcoin.”
Also, Peter C. Earle, a research fellow at the American Institute for Economic Research, said to Bloomberg that in a world where easy money-printing becomes commonplace “precious metals and cryptocurrencies would swiftly rise in popularity and therefore [their] price.”
