Fed’s Infinite Printing U.S. Dollar Makes Bitcoin’s Scarcity More Important Than Ever

Bitcoin maximum supply will always be 21 million.

As you all know, this is a serious time. The world is in the midst of a pandemic on a scale not seen in decades. More than two billion people are being confined to their homes to limit the spread of the coronavirus.

This forced shutdown of most of the world’s economies has significant economic consequences. It is a necessary evil, but the fact is that the post-Coronavirus crisis already promises to be a very delicate one with a probable recession in most of the world’s major economies.

Against this background of crisis, the American economy is not doing well. The financial markets have been literally collapsing since the beginning of March, and the latest unemployment figures make us fear the worst. In the last week, a record number of 3.3 million people have filed for unemployment claims.

A catastrophic unemployment crisis is starting. In the weeks to come, it can unfortunately only get worse. Many are even beginning to fear that unemployment figures will reach the record levels of the Great Depression that hit the United States in the early 1930s.

In an attempt to best respond to the economic crisis that is now unfolding, the Federal Reserve and the U.S. government have taken extraordinary measures. The latter has reached an agreement with the U.S. Senate on a package designed to stimulate the U.S. economy. At the heart of this package is a check for $1,200 that will be sent to every American.

The aim is to boost consumption in order to support U.S. companies that are being hit hard by the slowdown in consumption.

On the Federal Reserve side, various measures have been taken. It all started on March 3, 2020 with an already historic 50 basis points drop in interest rates. Faced with the acceleration of the fall of Wall Street, the Federal Reserve then decided to lower interest rates by 100 basis points in order to put the target between 0 and 0.25%.

The taboo of zero interest rates had just been broken by the Fed.

A few days later, on March 15, 2020, the Federal Reserve announced a $700 billion Quantitative Easing program with a lowering of the reserve rate requirement for banks to zero.

These already incredible measures were not enough to reassure Wall Street with a Dow Jones that even went below 19,000 points. Circuit-breakers became the norm for several consecutive sessions.

On March 23, 2020, the Fed decided to go from bazooka to nuclear weapons. The Fed voted unanimously for the immediate implementation of an unlimited quantitative easing program. The signal sent is clear:

The current monetary and financial system must be saved at all costs.

Following this announcement, Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, was interviewed on the CBS program “60 Minutes”. He then made an even more incredible statement:

“There is an infinite amount of cash in the Federal Reserve. We will do whatever we need to do to make sure there’s enough cash in the banking system.”

— Neel Kashkari

You read that right. Neel Kashkari boasts that the Federal Reserve can print an infinite amount of U.S. dollar.

Whatever it costs, the fiat system will be saved.

Unfortunately, he doesn’t say that the Federal Reserve’s ability to produce infinite amount of cash is at the expense of what American citizens own.

Currently, the money supply in circulation, represented by the M2 Money Stock index, is already close to $16T. From 2010 to 2020, this money supply has almost doubled. This sharp increase in only ten years has obviously represented a strong currency devaluation of the U.S. dollar.

The purchasing power of Americans has therefore declined over the last ten years.

Many believe that to face this economic crisis, the Fed will have to inject at least $6,000,000,000 into the system. If it would have taken 10 years for the M2 Money Stock to increase by $8T, it will only take a few weeks for it to increase by $6T this time around.

At this rate, the $30T will be largely exceeded well before 2030.

While the Federal Reserve boasts that it has an infinite amount of U.S. dollar at its disposal, Bitcoin continues to see its maximum supply set at 21 million. Better yet, the maximum supply was already 21 million in 2010, and it will still be 21 million in 2030, and even in 2050:

Comparison of Bitcoin maximum supply with M2 Money Stock USD

Bitcoin has a clear monetary policy that does not depend on any arbitrary decision by humans.

Bitcoin’s monetary policy is defined within the Bitcoin source code. It is automatic and predictable. In any case, there will only be a maximum of 21 million Bitcoins available. Likewise, the creation of new Bitcoins will continue to shrink every 210,000 validated transaction blocks.

Whatever happens, the third Halving of Bitcoin will take place after the block 630,000.

What is most incredible is that this long awaited event comes at the same time that the U.S. dollar supply is clearly described as infinite by the Federal Reserve. Thus, while Bitcoin will undergo a real supply shock in May 2020, the U.S. dollar will continue to be devalued.

The difference between the fiat system and the Bitcoin system will be highlighted in an incredible way at the best of times.

This scenario is so perfect for Bitcoin that you would almost think that someone wrote it in advance to promote Bitcoin. Its scarcity will become even more acute in the eyes of the entire world due to the devaluation of the value of the U.S. dollar, whose supply has become infinite.

I believe that Bitcoin will benefit greatly from this exposure in the coming months. I remain very optimistic for a very strong bull market that will take place as expected in the 18 months following its third Halving.

The coming months will be exciting for Bitcoin, which in addition to its traditional role as a safe haven, will also take on the role of hedge against currency devaluation.