According to Bloomberg, Bitcoin (BTC) may rise due to the huge “printing of money”.
Bloomberg contributor Jared Dillian wrote about the U.S. Federal Reserve and other major central banks for printing tons of money during the COVID-19 pandemic.
Dillian writes that the dollar “has no real intrinsic value” and money is gradually losing its meaning because of the multi-trillion stimulus packages.
“It is not crazy to think that government spending can reach $ 10 trillion – for just one year! And the numbers will go up from there, “writes Dillian.
Is the Fed really printing money?
You may have seen the ‘money printer’ meme that highlights the Fed’s massive effort to mitigate the coronavirus economic scam.
On March 23, the most powerful central bank in the world presented its unlimited “printing money” plan. PlanB, the anonymous Dutch economist who created the S2F model of Bitcoin, commented that the Fed “turned Zimbabwe” with an unprecedented move.
American banker Neel Kashkari also went viral after mentioning that the Fed has “an infinite amount of money” during its 60-minute interview.
However, it is important to understand that the Fed does not create purchasing power out of nothing. It lends money in exchange for other assets (such as Treasury bills).
Inflation is still possible
According to Bloomberg’s Dillian, it is difficult to predict the economic impact of trillions of dollars spent on aid for coronavirus.
As the dollar is used as a reserve currency, it is unlikely to cause hyperinflation as in Zimbabwe and Venezuela. However, it is reasonable to expect inflation rates to rise.
Another scenario described by Dillian is the Japaneseization of the US economy, but it is important to understand that Japan has managed to keep its inflation under control because of the aging population.
In this ceaseless money printing scenario, Bitcoin has never looked more attractive. After all, it was created during the last financial crisis and is a scarce digital asset. This means that there is a limit of 21 million maximum bitcoins already in existence. No government or any centralized authority figure can decide to “print” more.
In addition, every four years, an event called “halving” halves the amount of BTC produced. The next one will take place in approximately 26 days, and the block reward will be reduced to 6.25 BTC per block. As fewer bitcoins are generated, the pre-programmed inflation rate decreases only over time. Today, that rate is approximately 3.7% and will drop to 1.8% after halving.