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Written by: Ryan Cook
On March 11th President Biden signed the $1.9 trillion COVID Relief Plan. While the package will provide much needed economic relief for many individuals and institutions, there are many who feel unwary about a relief package that gives every American citizen $1400 at the cost of $5700 per person - the amount to be paid later. The nearly $2 trillion package added to the US debt to push it past a total of $28 trillion for the first time ever.
The large bill is the latest of the government’s increasingly ambitious spending habits. With the recession of 2008 the Fed began printing money at an increased rate in order to keep interest rates low and lessen economic difficulty. Although the recession eventually abated, the rapid money printing did not. And with these expensive recent COVID packages the US has turned up the rate of money printing even more.
At what point does the government pull back and start paying off the debt? Or is the dollar going to forever depreciate as we add more and more to the national debt? Your guess is as good as mine. With our current national finances, at best, inflation in coming years will likely be around 10% per year, and at worst it could be as much as 20%. All this in perspective, you can see why investors are a little spooked. Companies and banks are rushing to buy up long term assets in order to hedge against the melting ice cube that is cash.
Bitcoin As An Inflation Shield
Unlike government-sponsored currencies, Bitcoin and other block-chain cryptocurrencies cannot inflate. There are only 21 million bitcoins available to be mined, and that number is not going to change. Presently we have found 18 million of them, and many experts forecast that the closer we get to finding all 21 million coins the faster the value of Bitcoin will rise. Much like the finite quality of gold, Bitcoin’s limited supply and its unregulated nature means that it is not a currency that can be tampered with like the dollar. Bitcoin has been on the tear in these last months and likely much of that has to do with growing fears about the US’ money supply.
Bitcoin’s Appreciation Might Just Be Getting Started
When you look at how today’s society is more focused on personal productivity, democratized investing and independence from traditional institutions than ever, cryptocurrency seems like a trend that is going to be sticking around for a while. Furthermore, as more and more institutions buy into Bitcoin and stabilize its price, it’s looking more and more safe to wary investors.
As we’ve seen with the recent NFT craze, the world is getting more and more comfortable with the idea of block-chain technology and online assets. Younger generations seem less and less entranced with the assets of the past such as gold, and seem to lean more and more towards digital assets. People everywhere are learning to trust software and online entities. The fact that Bitcoin has nearly tripled in the last six months seems to confirm these theories and it shows a great deal of bullish buying energy in the space. It could be that Bitcoin is just getting off the launchpad as the world economy adopts standardized, globalized systems of cryptocurrency that can withstand reckless governmental money-printing and threats of inflation.