Despite initial expectations of a robust rally, major cryptocurrencies Bitcoin (BTC), Ethereum (ETH), and XRP have encountered a slowdown in momentum following a promising start in 2023. However, a prominent tech company’s leaked disclosure can alter this trajectory.
With the Federal Reserve (Fed) grappling with a staggering $33 trillion US “debt death spiral,” investment banking firm Jefferies analysts have warned that the Fed may be compelled to restart its money printing presses.
This move could trigger the collapse of the US dollar and ignite a significant price boom for Bitcoin, rivaling the value of gold.
Expert Advocates For Bitcoin As An Inflationary Safeguard
A recent Forbes report indicates that Bitcoin’s highly anticipated halving event, expected to cause price volatility, is imminent.
Christopher Wood, Jefferies’ global head of equity strategy, emphasized in a note to clients seen by CNBC that G7 central banks, including the Federal Reserve, are unlikely to withdraw from unconventional monetary policies smoothly. Notably, Wood considers Bitcoin and gold as “critical hedges” against the resurgence of inflation.
Since spring of 2022, the Federal Reserve embarked on reducing its ballooning balance sheet of nearly $9 trillion, which expanded significantly during the COVID-19 pandemic and subsequent economic downturn.
This process, known as quantitative tightening, involves draining liquidity from the financial system and shifting the burden of newly issued debt onto the private sector.
US Dollar Caught In ‘Death Spiral’
In addition to balance sheet reductions, the Fed has implemented rapid interest rate hikes to rein in soaring inflation. However, this approach has raised concerns about a potential counterproductive “death spiral” for the US dollar, potentially bolstering the value of Bitcoin.
Wood suggests that the Fed may be forced to adopt a more accommodating stance in response to a US recession. This shift would occur due to a larger-than-usual lag in the Fed’s interest rate hikes aimed at curbing inflation following the significant expansion of the money supply in 2020 and 2021.
Wood further explains:
Such a failure to exit from unorthodox monetary policy in a benign manner is likely to culminate in the collapse of the US dollar paper standard to the benefit of both gold bullion owners and also owners of Bitcoin. Meanwhile, Bitcoin, along with Ethereum and XRP to a…
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