Crypto’s fundamental value has long been questioned by its cynics. They cite Bitcoin’s “slow” transaction speeds, the Ethereum DAO hack, and other “shortcomings” in the industry as reasons to claim that this asset class has no future.
But, the macroeconomic landscape is developing to a point where crypto, especially Bitcoin, is making so much sense in today’s tumultuous world.
Bank of Japan Signals Interest in “Unlimited” QE
Despite the strong bounce in the price of assets, crypto included, the outlook for the global economy is far from perfect.
In the U.S. alone, 26 million workers have filed for unemployment over the past five weeks. On a corporate level, research firms are projecting trillions of dollars of losses in corporate revenues.
It’s no surprise, then, that central banks and governments around the world have gone into overdrive in an attempt to save people, corporations, and entire corporations.
The Bank of Japan (BOJ), Japan’s central bank, confirmed this trend just today. According to the Nikkei Asian Review, who cited sources familiar with the matter, the BOJ is looking to enable unlimited purchases of Japanese government bonds to try and boost the economy. It is also looking to expand its quantitative easing program to double-down on corporate bonds and commercial paper purchases.
Japan panicking – their system is now in official crisis mode. $JPY pic.twitter.com/ZiIhxjHdTD
— IceCap (@IceCapGlobal) April 23, 2020
Although the U.S. has already launched a limited bond-buying program, Max Bronstein, a part of the crypto exchange Coinbase’s institutional investment team, asserted that this simple headline confirms “the current system is completely broken.”
Sven Henrich (who seems to be neutral on crypto), the founder of Northman Trader, further summed up the current outlook when he wrote the following in reference to the recent BOJ headline:
“Central banks are weapons of economic mass destruction. No sense. No limits. No exit strategy.”
Crypto, Namely Bitcoin, Stands to Benefit
There is a sentiment growing that crypto assets, which are decentralized and relatively scarce (some of them) in comparison to the fiat money of central banks, stands to benefit from this trend towards an uncharted monetary and fiscal territory.
Raoul Pal — a former Goldman Sachs executive and former hedge fund manager — explained in the April edition of his newsletter Global Macro Investor that he sees a serious chance that we will see “the failure of our very system of money” or at least a collapse of the “current financial architecture.”
Crypto is the solution. And Bitcoin will dramatically benefit from a shift from fiat systems to a digital ecosystem.
In regards to Bitcoin, in particular, Pal wrote:
“It is an entire trusted, verified, secure, financial and accounting system of digital value. […] It is nothing short of the future of our entire medium of exchange system, and of money itself and the platform on which it operates.”
He added that the crypto asset has the potential to reach $100,000 in the coming two years, and even went as far as to throw out a $1 million upper bound to his prediction should the macro perspective change dramatically.
Photo by Paul Fiedler on Unsplash