The rise in Bitcoin’s price has left many scrambling for a reason, especially with institutional demand being perceived as the biggest driver of the current rally. Jesse Powell, the chief executive of crypto exchange Kraken, attributes the chain of events to the weakening dollar.
Stimulus Printing Got us Here
Speaking in a recent interview with Bloomberg, Powell explained that many had witnessed a significant change in perspective with the dollar. While the greenback has served as the global reserve asset for years, the coronavirus pandemic threatened its position.
Like most economies, Washington has had to work significantly to provide a landing spot for citizens and businesses affected by the coronavirus. Accelerated stimulus packages and increased money printing eventually drove the dollar’s price down. Combined with the drop in oil prices and the effect of the pandemic on jobs, the American economy took a significant hit.
True to form, investors scrambled to find a safe haven and wait out the coronavirus storm. Apparently, they chose Bitcoin.
Powell further explained that holding the dollar became increasingly risky in 2020, compared to assets like Bitcoin. Thanks to the leading cryptocurrency’s finite supply and deflationary monetary policy, it maintained its stability. Eventually, institutional investors flooded into the market and drove its price through the roof.
The exchange boss added that investors had seen Bitcoin and tech stocks as better alternatives to holding cash. In part, he said:
“Historically Bitcoin has been uncorrelated to the rest of the stock market. I think what we are seeing now is just that both financial assets are on fire and reacting to the money printing that is happening.”
Build Back Better
Things could get much worse as the United States appears to be dealing with a second wave of the coronavirus.
The incoming Biden administration has also made some economic policy declarations that could benefit Bitcoin. As his inauguration edges closer, the President-Elect has unveiled his Build Back Better economic plan, which involves $7.3 trillion in investment and recovery spending.
Per reports, the administration plans to spend this on initiatives like housing, education, clean energy jobs, healthcare, and economic fairness. However, it could add to the mountain of debt that the United States already accrued this year.
Billionaire investor Jim Rogers has also criticized the President-Elect’s pick for Treasury Secretary, Janet Yellen.
Speaking at an investment summit, Rogers, the co-founder of George Soros’ Quantum Fund, explained that Yellen had shown a propensity to print and spend money.
With economic recovery at the forefront of the Build Back Better and a reportedly caution-free Treasury, the Biden administration might balloon the national debt entirely. That will benefit Bitcoin, even more, possibly taking it way past the $30,000 mark.