The past few months have been an absolute whirlwind for Bitcoin and other crypto assets. Ever since the start of 2019, the cryptocurrency class has outperformed, outpacing every single other notable asset class currently trading on public markets.
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In fact, as reported by NewsBTC, since the U.S. kicked off its latest trade war with its economic rival, China, Bitcoin has gained 105%. While this number means nothing on its own, the average asset class that Grayscale surveyed — stocks, bonds, and foreign currencies included — actually lost 0.5% in the same time frame.
And BTC may continue to outperform, especially with more dovish fiscal policy in tow.
Free Money = Bullish for Crypto
Like it or hate it, cryptocurrencies, including the deflationary Bitcoin, have benefited from the liquidity that central banks have injected into the economy over the past decade.
For those unaware, since 2008’s Great Recession, central banks have been injecting money into the economy like there is no tomorrow. This has been done through Quantitative Easing — the government purchase of securities to increase liquidity and asset prices — and through low interest rates, which have been accentuated in places like the European Union and Japan.
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These policies have been bullish for the Bitcoin price, as increased liquidity and “cheap money” can force borrowers to take on risk, leading them to nascent industries like cryptocurrencies. Also, they promote borrowing to build businesses, which has been accentuated in the growth in the level of corporate debt and complexity of the venture capital space.
But according to Bitcoin commentator Alex Krüger, central banks are about to take a step further.
Citing a recent report from the world’s biggest asset manager, Blackrock, the economist suggested that there are now analysts on Wall Street advocating for “central banks to perform fiscal policy” by “Going Direct” — “central banks giving ree money to public and private sector spenders.”
A Blackrock team of former central bankers advocates for central banks to perform fiscal policy, as monetary policy unlikely to be effective by itself.
They call it "Going Direct" = central banks giving free money to public and private sector spenders.https://t.co/Jai7kB1CvM
— Alex Krüger (@krugermacro) August 18, 2019
This is different than the aforementioned steps of decreasing policy rates and injecting money, which are classified as cases of monetary policy. Krüger remarked that this is going to be accomplished by less-independent central banks, which is being accentuated by Donald Trump’s anti-Federal Reserve cries.
While this may seem logical for those wishing to have full control over the economy, Krüger believes that “having elected politicians with control over both monetary and fiscal policy is a disaster waiting to happen.”
Having elected politicians with control over both monetary and fiscal policy is a disaster waiting to happen.
Bitcoin and gold should benefit from this long-term underlying theme.
— Alex Krüger (@krugermacro) August 18, 2019
Said disaster, should it hit, will be bullish for Bitcoin and gold. Even the narrative itself, per the analyst, will be a boon for the two assets, widely regarded as two iterations of the same concept.
Bitcoin, a Hedge Against Risk
Like gold, Bitcoin on the base layer is scarce, divisible, somewhat fungible, decentralized, and non-sovereign — five of the main tenets of a store of value.
This isn’t only a theory. Bitcoin has been rallying in tandem with gold over the past few months, which comes as trade wars have erupted (China & U.S., Japan and South Korea, etc.), European and some Asian banks have been capitulating, Hong Kong and France have erupted in protest, and so on and so forth.
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