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Sirwin

The Federal Reserve just pumped Crypto - Inflation is no longer transitory

By Keeef | CryptoFactor | 16 Dec 2021


The Federal Reserve just pumped Crypto

Bitcoin ($BTC) price rallied to $49,000 as the markets reacted to the Federal Reserve increase the rate of the tapering of stimulus to $30B, as it declares that it no longer views the inflation suffered by the US and Western economies as 'transitory'.  Did anyone ever really believe this? Whilst the market hates uncertainty, the crypto and traditional markets reacted positively as fear around what news would be announced yesterday was resolved, all be it terrible news for the working class American.   

Stimulus is now set to end as early as March 2022, however, the horse may have already bolted as we already see 40-year high inflation. The truly shocking scale of currency creation from thin air of the world's reserve currency has only served to highlight the necessity of cryptocurrencies and the haven that Bitcoin can provide from reprehensible inflationary monetary policy, a stealth tax of the working and middle classes, diminishing the purchasing power of folks like you and me.  The Big F (The Federal Reserve) also pointed towards 3 separate interest rate rises in 2022, which I believe will compound the problem.  There is a reason after all why governments subscribing to modern economic theory avoid this at all costs and take this step last.  

Fundamental news such as this has a dominant effect on the Crypto market, and it appears to me as if the downside we saw last week was a culmination of the Bitcoin Whale manipulation and this rumour being priced in.  The effect of inflation is felt only after the newly devalued currency supply trickles, then floods into the wider economy, but the fact remains it is still flooding and today we learned that the tap is incrementally being turned off.  40-year high inflation is already here.  What will inflation look like once the tap is turned off, and the flood of currency has left the pipeline? 

The day before this, the Senate voted by a margin of one to once again raise the debt ceiling, giving permission to continue irresponsible oversupply of currency.  I would feel a heck of a lot worse if I didn't hold Bitcoin ($BTC).

Take a look at the chart below: It's the M1 currency supply chart.  It shows the rate increase which the Federal Reserve has been creating currency out of thin air since the 1980s, but notably at the beginning of 2020, that supply went parabolic. 

M1 Supply

What is sad is that the harm is felt by the average working and middle classes, who unfortunately have little awareness of monetary systems, probably by design.  Most students receive little to no education in finances or economics in schools in the West, and I feel it's up to us to look out for ourselves, educate ourselves and those we care about.  Lessons sadly, are seldom learned from and I find myself looking to history, in cases such as the Weimar Republic, and as recently as 2019 wherein Venezuela inflation ran at 65,000% year over year.  Venezuela now enjoys 2000% annual inflation. The poverty, suffering and starvation that followed are terrible but are possible even in the USA.  If you are new to investing in cryptocurrencies, I have links below that you can take full advantage of and even bag yourself from free Bitcoin and other Alt-Coins to get started with.  

Brrr

The State of Bitcoin

All the above is for me, one of the main reasons I'm betting on cryptocurrency as a means of avoiding stealth tax by inflation and hyperinflation.  This is the fundamental which for me above all highlights the need to have an equitable, fair and sound currency.  I was happy to take advantage of the downside correction earlier in the week to accumulate more BTC and Alt-Coins, and upon the rally following the announcement we saw a solid rally for Avalance ($AVAX), Polygon ($MATIC) and Fantom ($FTM) notably as well as Ethereum ($ETH) reclaiming is $4,000 level.  

The interesting thing to remember about a coin pair, BTC/USD for example, is that most people concentrate on the value of BTC against USD.  In a hyperinflationary environment, we will be thinking more about the loss of value of USD against BTC. 

I publish regularly right here on Publish0x and on Reddit.  Please do remember that none of the above is financial advice, you should always do your due diligence.  

 

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Keeef
Keeef

Cryptocurrency Journalist, Enthusiast and Commentator


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