Bitcoin price rises and rises also thanks to US central bank
According to analysts, the announcement by the US central bank that it will continue to print huge amounts of money in the coming years acts like an advertisement for Bitcoin. This could further fuel the market for the king of cryptocurrencies, they said.
The last few days have brought exciting things. On 16 December, the Federal Reserve (simplified: the US central bank, Fed) stated in a press release that it would continue to support the US economy in the coming years. Specifically, it would buy 80 billion US dollars worth of American government bonds per month. Another 40 billion US dollars per month by Bitcoin Era will be spent on buying up mortgage-backed securities. This is to be maintained until the employment targets and an inflation rate of 2 per cent have been reached in a stable manner.
How long will the Fed support the US economy?
As things stand, it may take two to three years to reach this target. This would mean that the Fed would pump at least 1,440 billion US dollars, or over 1.4 trillion US dollars, into the US economy per year. That would be equivalent to about 20 percent of total US tax revenues.
Such an expansion of the money supply could lead to inflation, although some experts dispute this. In any case, there is a risk of a loss of confidence in the purchasing power of the US dollar.
Mark Haefele, the chief investment officer at UBS Global Wealth Management told Reuters:
‚We foresee further weakness [in the US dollar].
What impact will the announcement have on Bitcoin?
The initial impact of the announcement was already evident yesterday, when Bitcoin (BTC) seemingly effortlessly hit a new all-time high. The price rose to well over 23,400 US dollars per Bitcoin in the process.
Bitcoin offers the advantage that it is limited to 21 million units and is therefore not subject to inflation. In addition, most classic asset types are heavily oversold (in Germany, for example, real estate), so many investors are trying to switch to other assets.
Vishnu Varathan, the chief economist of Mizuho Singapore, one of the world’s largest financial services companies, told Reuters that he expects the bitcoin price to rise further. One reason for this, he said, is the Fed’s US monetary policy.
What else speaks for Bitcoin?
Meanwhile, more and more institutional investors are recognising the value of Bitcoin and other cryptocurrencies. Investments by major financial services providers from the US, Europe, the UK and Japan could drive the Bitcoin price even further. Currently, the Bitcoin market has a capitalisation of USD 422 billion. If the major financial services providers invest only 1 per cent of their funds in Bitcoin, 600 billion USD could be added.