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Bitcoin Is An ‘Insurance Policy’ Against The Fed

Bitcoin Is An ‘Insurance Policy’ Against The Fed

The U.S. dollar has been under pressure this year, taking a big hit as the coronavirus pandemic wreaked havoc on America’s economy.

In the run up to next month’s U.S. presidential election, investors are scrambling to understand how a win for either incumbent Donald Trump or Democratic challenger Joe Biden will move the dollar and currency markets.

However, former Facebook
executive-turned venture capitalist, Chamath Palihapitiya, has warned neither Biden nor Trump will help U.S. dollar—but holding bitcoin is an “insurance policy” that helps him to “sleep soundly at night.”

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“The reality is that [the Federal Reserve and the U.S. Treasury] have printed so much money that the likelihood is that we’re going to continue to see asset price inflation independent of who’s in the White House,” Palihapitiya told CNBC’s Squawk Box this week, adding he holds bitcoin just “in case the central banks and governments of the world step on a landmine.”

The Fed and the Treasury have embarked on massive stimulus programs this year, injecting trillions of dollars in the financial system in an attempt to offset the economic damage caused by the coronavirus pandemic.

This unprecedented intervention, propelling the stock market to record highs even as unemployment has spiked and businesses struggle nationwide, has sparked fears among some investors that a severe bout of inflation is on the way.

Palihapitiya, who began his VC career while still

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Will Bitcoin Make A Good Investment? Economic Uncertainty (Cryptocurrency:BTC-USD)

Will Bitcoin Make A Good Investment? Economic Uncertainty (Cryptocurrency:BTC-USD)

In our previous analysis, we discussed one primary reason that Bitcoin will make a good long-term investment as the price is likely to go up and stabilize once institutions gain SEC-regulated access. Fidelity and the NYSE-founded Bakkt are two examples of platforms that will influence the first phase of bitcoin’s broader adoption. These two platforms have not yet launched, but a new supply-and-demand dynamic will occur when institutional investors can access cryptocurrencies.

The next phase for Bitcoin stability and price support will hinge on the eroding trust in fiat currencies – both globally and also from younger generations who are digital natives with good reason to seek alternatives outside of the fiat system.

Global Unrest Sees Bitcoin as Alternative to Fiat Currency

Economists have discussed the effects of going off the gold standard during Nixon’s presidency ad nauseum, yet this has been a futile conversation in the past as there has been no alternate method of transacting other than centralized cash. Gold and precious metals are hard to transport and cannot be used to transact daily in the modern age, despite having a store of value.

Globally, bitcoin is more attractive than many foreign currencies. Venezuela, for instance, is going through a period of hyperinflation with a cup of coffee costing 2,800 bolivars up from 0.75 bolivars less than a year ago, representing an increase of 373,233%, according to Bloomberg data. Essential goods such as toilet paper and medicine are very expensive, and many Venezuelans are fleeing the country.

Bitcoin has emerged as a solid alternative to Venezuelan bolivars. Even when Bitcoin loses value from $19,000 to $3,000, it’s still outperforming the inflation of Venezuela’s currency. On the flip side, when Bitcoin rises in value from $5,000 to $11,000 in one month, it allows global populations to hold an appreciating

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