Bitcoin's Biggest Bull Case- Central Bank Monetary Policy and the World Gold Marketcap
The COVID-19 lockdown has showed how fragile the world's economies are. The Federal Reserve Bank has printed north of $6 trillion to help the airline industry, small businesses and consumers. In additon, world stock markets have come crashing down, with the DJIA off 20% in 2020 YTD. Gold and Bitcoin diverged, and are now traveling in the same direction due to Bitcoin's impending rewards halving and the economic uncertainty all around us. As Central Banks print more money, a bullish case for Bitcoin emerges hinging on the gold market, currency printing thr world over and rising world population.
Central banks have several mechanisms to add money into the current supply. They can buy bonds on the open market, add money to the economy directly through stimulus checks and even purchase assets on the open market. The Federal Reserve can also lower the Federal Funds Rate, which is how much banks need to hold in reserve for emergency purposes. Banks then have to hold less cash and can invest more making loans and buying assets. Overall, Central Banks have a toolbox to increase liquidity.
The biggest concerns nations have during currency manipulation is that the currency may decline in value, making everyday items more expensive. Inflation and hyperinflation may occur if monetary policy causes the value of the currency to decline due to oversupply. There are also concerns that demand for currency and goods could decline, leading to deflation- a reduction in prices that harms industries as the price of their good decline.
Bitcoin and gold are both finite resources with robust use cases and rising demand. As more people are born, a certain percentage of the population is keen to acquire both of these assets with finite supply. World population grows at a rate of approximately 1% per year, and the growth is pronounced in emerging economies where young people, whom are statistically most likely to purchase and use Bitcoin are increasing in number.
There are only ever going to be 21-million Bitcoin released, and discoveries of gold are slowly decreasing worldwide. The cryptocurrency market has a marketcap of only $221 billion, as compared with gold's marketcap of approximately $3 trillion. This shows that Bitcoin has a huge growth potential. Older generations hoard gold to preserve their purchasing power and build wealth while younger generations seek cryptocurrency to do the same things. Use this time before the rewards halving to accumulate this amazing asset.
Originally published in my Publish0x account I own at:
Also published in my Hive.io account at anarchy999.
Sources:
Picture from Pixabay.
https://www.thebalance.com/is-the-federal-reserve-printing-money-3305842
https://coinmarketcap.com/currencies/bitcoin/
https://www.sunshineprofits.com/gold-silver/dictionary/size-the-gold-market/
https://ourworldindata.org/world-population-growth
