Economic, Monetary Inflation And The Prospects For Crypto

Given the global economic crisis at the time, I believe that Nakamoto had a disdain for the traditional finance system and did not trust fractional reserve banking. He even wrote a memorable post later on where his message was clear.

“Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible,” said Nakamoto.

Roughly 11 years later, the COVID-19 pandemic struck, and central banks worldwide rushed to implement the same old-school quantitative easing policies. Every sovereign government decided to turn on the money printer machines to try to contain the financial disaster expected after the pandemic. But more money in circulation leads to inflation… I think everyone knows that.

However, Federal Reserve Chairman Jerome Powell continues trying to keep a poker face when saying that inflation would not “react much.” Really? Do you believe that?

Since the pandemic started, the Fed’s total assets have skyrocketed by 85% to hit a new all-time high of $7.69 trillion. That’s $3.54 trillion printed in over a year without counting the latest $1.9 trillion stimulus package that the Biden administration just passed.

If $5.44 trillion newly printed banknotes don’t scare you, I don’t know what will.

Institutions are aware of the impact of such much money put into circulation. They have all decided to dump their cash reserves and add Bitcoin to their balance sheet. Tesla was one of the first movers. Now, Time Magazine, WeWork, Square, MicroStrategy, and many others have followed.

Given Bitcoin’s deflationary business model, institutional investors are starting to realize that this is the only asset that could serve as a hedge against inflation. Even Bloomberg said that Bitcoin would soon replace gold as the global reserve asset.

If you are still one of those who think that Bitcoin doesn’t have intrinsic value, you may need to pay close attention because fiat currencies are becoming obsolete and worthless. There is a chance your U.S. dollars get consumed by inflation as the Zimbabwean dollar did. Even if the probability is minuscule, don’t you think you should follow what the big players are doing?

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