The US Federal Reserve has declared itself ready to tolerate inflation of over 2%. At this announcement BTCUSD, i.e. the reference pair for the exchange of Bitcoin with the US dollar, rose in value to 11,600 dollars.
The words of Fed President Jerome Powell were very clear:
„We will try to achieve an average inflation of 2% over time. Therefore, following periods in which inflation has been below 2%, an appropriate monetary policy will probably aim to achieve inflation moderately above 2% for some time“.
The news suggests that the US dollar could depreciate. On the contrary Bitcoin with its deflationary nature could increase in price.
Bitcoin, a new bullrun?
The Fed’s announcement adds up to a central event for Bitcoin, the May halving: with the halving of the miners‘ premiums, the production of Bitcoins is also halved.
This is where a significant difference between dollar and Bitcoin comes in. While hypothetically one can continue to print banknotes, it is not possible to undermine Bitcoin indefinitely.
Satoshi Nakamoto designed Bitcoin so that up to 21 million BTCs could be put into circulation. It is the deflationary nature, as opposed to the inflationary nature of the dollar, that risks to make the currency lose value.
In 2016, after the halving, Bitcoin started a long run that led it to increase in price until December 2017, when it touched 20,000 dollars (and then descended).
At that time, however, there was not the economic crisis that the world is currently experiencing because of the Coronavirus.
In short, everything suggests that there are the conditions for Bitcoin to increase in price. This is also what an expert in the field, Tyler Winklevoss, says, according to which the risk of high inflation of the US dollar will increase the value of Bitcoin up to 500,000 dollars.
There is nothing concrete that can say whether BTC will actually reach these figures. But surely Bitcoin, as well as gold, could become a safe haven asset in case the US currency would significantly lose its purchasing power.
It has to be said that this time the world of institutional investors seems definitely more careful. For them the investment proposals are increasing. The latest in order of time is that of Fidelity Investment, which has filed the documentation for the Wise Origin Bitcoin Index Fund with the SEC. Entry fee: $100,000.
BTCUSD, the stalemate phase
The certain point is that this week Bitcoin has not actually grown, on the contrary, its weekly value (updated to Friday‘ August 28th) has decreased by about 2.5%.
Bitcoin has consolidated the support of the 11,300 dollars, but can not break through the wall of 11,500, if we exclude the reaction followed to the words of Jerome Powell, which was followed by a retracement.
Bitcoin ultimately remains in the hands of speculation.