Bitcoin as a Hedge Against Inflation - Stanley Druckenmiller: “I can’t find any period in history where monetary and fiscal policy were this out of step with the economic circumstances, not one.”


While Bitcoin and other cryptocurrencies are dropping--and our friends and family take pleasure in reminding us of that on a daily basis--it can become easy to lose sight of long-term strategy and focus too much on short-term tactics. We should keep sight of the long-term and remember that the alternative is being subject to the rapid devaluation of a fiat currency and the short-sighted central authority that controls it. 

While there are many reasons to prefer decentralization to centralization generally--and that is one of the many touted benefits of crypto--this becomes particularly important when the Fed is literally just printing money willy nilly.

Stanley Druckenmiller is a hedge fund manager and billionaire who managed money for George Soros. Like many on Wall Street, he was initially a crypto-skeptic who started investing in Bitcoin last year as a store of value (he's also heavily invested in gold.) Like gold, crypto can act as a hedge against inflation; it can't simply be printed. He's betting on these stores of value due to what he (and many, at least since the Great Recession of 2008) have seen as as the recklessness of the monetary system.

His recent comments are illustrative: “I can’t find any period in history where monetary and fiscal policy were this out of step with the economic circumstances, not one.”

He further highlighted centralization as the root of the problem and the dollar's instability: “The problem has been clearly identified. It’s [Fed Chair[ Jerome Powell and the rest of the world’s central bankers,” he said. “There’s a lack of trust.”

According to CNBC, he further sees the solution in something that sound an awful lot like blockchain technology. From the article:

'Drucke[n]miller has entertained the thought that a challenge could come from the crypto world. He said in the CNBC interview that the ultimate solution could be “some kind of ledger system invented by some kids from MIT or Stanford” though he conceded that “I don’t know what it will be.”'

https://www.cnbc.com/2021/05/11/stanley-druckenmiller-says-the-fed-is-endangering-the-dollars-global-reserve-status.html?mc_cid=34a37ff919

While there is probably an emerging bubble in alt-coins and not every crypto project will be a store of value, the potential solutions provided by Bitcoin and blockchain technology seem obvious. The problem is centralization and inflation and blockchain technology seems to be the solution. Whatever the faults of current projects may be (whether they're used as stores of value and not currency, or whether their transfer fees are prohibitively expensive, etc.), the projects are constantly improving and eventually a large portion of them will be interoperable.

A perfect storm is brewing for the rise of crypto, with inflation rising and the USD losing its dominance in the world. The gains of investing in crypto could be tremendous and the cost of holding fiat could be terrible. 

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Brother Numsee's Crypto Craze
Brother Numsee's Crypto Craze

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