Nick Chong · 6 days ago · 2 min read · Insights via Grayscale Investments
Bitcoin › U.S. › Analysis
Bitcoin’s bull case grows as Federal Reserve says it has “no limit” on stimulus
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In response to the growing scrutiny of the world’s central banks amid the ongoing recession, CBS’ world-famous show “60 Minutes” on Sunday ran a segment on the Federal Reserve and its chairman, Jerome Powell.
Although Powell never once mentioned Bitcoin in the interview, many in the cryptocurrency space were quick to promote an interview with the world’s most powerful central banker as, ironically, a way to promote BTC.
Federal Reserve’s chairman “shills Bitcoin” in an interview with “60 Minutes”
Travis Kling — CIO of Ikigai Asset Management and a former portfolio manager at Point72 — said that after seeing the video, he is convinced “Jay Powell is going to do all the leg work for us.”
This is in reference to Kling’s long-standing belief, long before COVID-19 broke out, that the increasingly dramatic monetary policy — be that trillions in quantitative easing or low (or even negative) interest rates — will cause Bitcoin to stand out as a hedge, as insurance, as a credit-default swap against “fiscal and monetary irresponsibility.”
Jay Powell is going to do all the leg work for us.#Bitcoin is a non-sovereign, hardcapped supply, global, immutable, decentralized, digital store of value.
It’s an insurance policy against this. pic.twitter.com/06yh6dcBw6
— Travis Kling (@Travis_Kling) May 18, 2020
Others in the space echoed this, with the @Bitcoin Twitter account jokingly thanking Powell for running a hidden “advertisement” for the cryptocurrency during the interview.
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.”
Big names are picking up on the narrative
The narrative that Bitcoin is a hedge against money printing was a fringe narrative for the longest time, yet the aforementioned recent comments from Jerome Powell and the respective actions of the Federal Reserve and other central banks are changing this.
Now, there are prominent names in the investment world saying that they see Bitcoin as a solid investment due to its ability to be scarce and decentralized in a world where a central group of individuals is actively eroding the scarcity of fiat money.
Elon Musk — yes, the Elon Musk of Tesla, SpaceX, and a handful of other ventures — recently said to “Harry Potter” author J.K. Rowling that he thinks “massive currency issuance by government central banks is making Bitcoin Internet money look solid by comparison.”
Pretty much, although massive currency issuance by govt central banks is making Bitcoin Internet 👻 money look solid by comparison
— Elon Musk (@elonmusk) May 15, 2020
This was echoed by Paul Tudor Jones, a billionaire hedge fund manager regarded to be one of Wall Street’s most respected investors. The investor went on CNBC and released a research note talking up BItcoin, saying how he thinks the asset is a proper hedge in these times where central authorities are literally printing trillions.
“I am not an advocate of Bitcoin ownership in isolation, but do recognize its potential in a period when we have the most unorthodox economic policies in modern history. So, we need to adapt our investment strategy. […] At the end of the day, the best profit-maximizing strategy is to own the fastest horse. f Iam forced to forecast, my bet is it will be Bitcoin,” Jones wrote in a report.
The evidence backs this up
It’s important to remember that at the end of a day, a narrative is just a narrative — and narratives break all the time.
Think back to 2018, just months after Bitcoin peaked at $20,000. Then, analysts expect the Chinese New Year, Wall Street bonuses, tax season, and institutional investors to kick off a rally to fresh highs. To the surprise of many, none of these narratives become reality.
But in the case of BTC acting as “insurance” in a world with hands-on central banking, there is preliminary evidence to suggest that central banks are boosting Bitcoin.
As reported by CryptoSlate in April, Teddy Vallee — founder and CEO of Pervalle Global, a global macro hedge fund — shared the chart seen below, showing a seeming correlation between the total amount of central bank assets and the price of Bitcoin on a macro scale.
Highest conviction view over the next 1-3 yrs is that CB balance sheets are going in one direction – up. Given this premise, it seems the best form of expression is via $BTCUSD. While the chart below will need to prove itself, it holds weight both empirically and intuitively. pic.twitter.com/GIjOa15hJ4
— Teddy Vallee (@TeddyVallee) April 23, 2020
Kevin Kelly, the co-founder of crypto research firm Delphi Digital, backed up this sentiment with his own analysis, in which he explained that every time central banks stopped expanding their balance sheets in the past decade, Bitcoin found itself at a macro top.
Central banks, this data shows, are digging their own graves by helping Bitcoin’s growth to the mainstream. As Parker Lewis of Unchained Capital wrote in a recent article:
“When governments and central banks can no longer create money out of thin air, it will become crystal clear that backdoor monetary inflation was always just a ruse to allocate resources for which no one was actually willing to be taxed. In common sense, there is no question. There may be debate but bitcoin is the inevitable path forward.”