Yet Another Tailwind for Bitcoin? US Markets ‘Absolutely’ Not Prepared For Increased Inflation
- The US “utterly and completely unprepared” for an inflationary environment
- Why put your livelihood into something that could be devalued without your input?
- Govt. currency is funny money, once young people see this, the perspective of seeing crypto as a speculative class will flip
Last week, Atlanta Federal Reserve Bank President Raphael Bostic said inflation is stable and the US economy is close to full employment which means the Fed will be able to keep the interest rates where they are. Bostic said,
“In general I think both on the inflation and employment side, we are performing pretty much close to target if not right on it, so that's encouraging.”
The Fed cut rates three times last year and though most policymakers are saying that they won't be touching the rates in 2020, traders are betting the rate cut by June.
The US “Utterly And Completely Unprepared” For An Inflationary Environment
Currently, inflation is missing the Fed’s target and Bostic said the Fed could aim for a range or target higher inflation for a certain period should inflation is too low for too long.
However, US markets are “utterly and completely unprepared” for the possibility of an increase in inflation, according to the founder of $30 billion hedge fund Citadel, Ken Griffin.
“In the United States there is absolutely no preparedness for an inflationary environment,” said Griffin on Thursday.
Expectations of low inflation have encouraged investors to hold up on long-dated debt, which helped in pushing the rate on 30-year Treasury bonds close to 2%, near historic lows.
“It’s clear that even our most well-informed policymakers, and I do believe the Fed does phenomenally good research on economic policy, don’t see it coming either,” Griffin said about rising inflation.
Why Put Your Livelihood Into Something That Could Be Devalued Without Your Input?
And this could create yet another tailwind for the world’s leading cryptocurrency. As we saw this year, Bitcoin is reacting to the macro factors.
There is a bubble in confidence of ‘no inflation in our lifetime’
– inflation hedges have gotten cheap
— Thomas Lee (@fundstrat) February 6, 2020
It is because of inflation, the US Dollar has lost 98% of its value since the creation of the Federal Reserve. Co-founder and CEO of Coinbase said,
“Crypto is seen as real money that people can't tamper with (at least control is decentralized and I can trust people to review the open-source code).
Why put your livelihood into something that could be manipulated or devalued without your input.”
Govt. Currency is funny money
Apart from inflation, the US government debt is set to skyrocket as well. According to a Congressional Budget Office forecast, the debt held by the public is projected to rise to $31.4 trillion at the end of 2030 — the highest since the end of World War II. Co-founder and CEO of Coinbase said,
“Most people today probably still think of cryptocurrency as funny money or a speculative asset class.
But I believe we're going to see this perspective flip, probably starting with young people as with many things, where holding a government's currency is seen as funny money.”