Tyler Winklevoss, co-founder of the Gemini cryptocurrency exchange platform, believes that Bitcoin will likely experience a bull market run this year thanks to the extraordinary monetary policies the United States Federal Reserve Bank has been implementing to mitigate the economic damage of the coronavirus pandemic. On a social media update posted to Twitter, Winklevoss discussed a news story about the next round of stimulus spending that the Federal Reserve plans to carry out, and he explained why Bitcoin makes sense as a hedge against inflation.
The United States dollar has managed to retain its status as the leading international currency, but the reality of the greenback is that it has become more diluted than during the Great Recession. The economic stimulus and capital relief programs that the Federal Reserve is currently managing cannot be fully supported with financial guarantees such as bonds and other sovereign debt instruments, which means that some level of money printing can be expected. When the U.S. government engaged in quantitative easing after 2008, bailout funds had the backing of special notes and bonds that were easily sold at attractive prices; in the current situation, bond markets are strained due to the devastating impact of the pandemic.
There is no question that the dollar has been undergoing a long and steady period of inflation over the last decade. If anything, the greenback has indirectly benefited by the fall of the British pound sterling, which was caused by Brexit, and the instability of the Japanese yen, which has been under pressure from a sluggish economy. When other foreign currencies weaken, the greenback stands to gain by keeping its dominant status, but its true value has been diluted since the late 20th century.
Investors recognize that both the dollar and the stock market are inflated; for this reason, they are looking for the right flight-to-safety strategy. The finite supply of Bitcoin makes it almost impervious to inflation because it cannot be put through money printing processes. With the bond market not being very attractive at the moment, Bitcoin could likely become the go-to asset for hedge funds and other major investors, which means that the odds of another bull run this year are pretty good.