Bitcoin is now entering a region that has never been mapped before, because the crypto assets are traded across the global economic turmoil. The US dollar also fought for value. US dollars versus Bitcoin, which one will win?
So far, Bitcoin has survived very well, because it recorded a pretty good increase since the beginning of the year. Meanwhile the capital market (stocks) continued to weaken in a similar period.
And coincidentally this economic storm also coincided with the arrival of Bitcoin Halving which pushed the pace of new Bitcoin into the market through rewards to miners.
In the middle of May 2020, only 6.25 new Bitcoins will be produced per block (an average of 10 minutes). As a result, Bitcoin has become increasingly scarce and has reduced inflation to 1.8 percent from the current 3.65 percent.
And these past few days we have witnessed accumulation continuing before the most important moment, which only happens once every 4 years. Is this a strong marker of the rise in the price of Bitcoin in the coming months, related to the abundance of dollars in the market.
Dollar versus Bitcoin
The rate of circulation of Bitcoin is indeed the opposite of the rate of circulation of fiat currencies like the US dollar. When the economy deteriorates, the US Central Bank tends to dump more dollars into the market, as a rescue effort.
A recent report from Arcane Research says that the US Central Bank’s balance sheet has swelled as a result of the move to buy government bonds which has led to more money circulating in the market.
“Their balance sheet rose to new highs this week. Now it has exceeded US $ 6.5 trillion, an increase of around US $ 205.2 billion compared to last week. The ‘bubble’ of US $ 2.4 trillion or 58 percent since the end of February 2020, “said Arcane Research.
Although in the short term it is very effective to fend off further economic downturns, the long term impact is very dire, namely hyperinflation . That’s when the value of the dollar goes down.
“While the US Central Bank is printing more money, Bitcoin has a different plan through the Halving mechanism. As a reinforcement of value, ‘quantitative tightening’ can attract new investors to Bitcoin, because the central bank’s printing press is running at full power, “added Arcane Research.