Many people have been left scrambling after the massive rise in Bitcoin’s price and institutional demand has been perceived as one of the biggest contributors of the current price rally. The chief executive of Kraken, Jesse Powell, believes that this chain of events is linked with the weakening US dollar. Talking to Bloomberg in a recent interview, the crypto exchange’s CEO said that there had been a significant change in perspective of many when it comes to the dollar. For years, the greenback has held the position of the global reserve asset, but the COVID-19 pandemic has certainly threatened its position.
Similar to many economists, a significant amount of effort has been made by Washington for helping businesses and citizens survive this global pandemic. Accelerated stimulus packages, along with additional money printing ended up pressurizing the US dollar and its price dropped. The impact of the pandemic on jobs combined with the fall in oil prices, the world’s largest economy suffered from a massive hit. Keeping true to form, all investors rushed towards a safe haven that could be used for waiting out the COVID-19 storm. They opted for Bitcoin this time around, rather than the US dollar.
Powell went on to say that holding onto the greenback in 2020 had become extremely risky, as opposed to assets like Bitcoin. Due to the deflationary monetary policy and the finite supply of the leading cryptocurrency, it has managed to maintain its stability. Eventually, the market had been flooded with institutional investors and they had pushed up its price. According to the exchange’s boss, investors had considered tech stocks and Bitcoin as better alternatives to keeping cash. He said that Bitcoin had remained uncorrelated to the stock market historically and what was now happening was mostly because of new money being printed and the problems faced by other financial assets.
Things are expected to get a lot worse as the United States is now facing a second wave of the COVID-19 pandemic. There have also been some declarations made by the incoming Biden administration about the economic policy, which could work in favor of Bitcoin. As the President-Elect’s inauguration draws closer, he has revealed his economic plan called Build Back Better, which involves recovery spending and investment worth $7.3 trillion. According to reports, the administration is planning on spending this on several initiatives, such as education, healthcare, housing, clean energy jobs and economic fairness.
However, this could increase the mountain of debt that the US has already accrued in 2020. Jim Rogers, the billionaire investor, also criticized Janet Yellen, the choice of the President-elect for the role of Treasury Secretary. The George Soros’ Quantum Fund founder, Rogers spoke at an investment summit and explained that Yellen had indicated a propensity of printing and spending money. With a caution-free Treasury and economic recovery the main focus of the Biden administration, the national debt may surge significantly. This could work in favor of Bitcoin and eventually push it past the $30,000 mark.