It is no secret the Federal Reserve Bank (Fed) and the US Government have been printing US dollars due to the COVID pandemic and following the market correction of March 2020. But how much have they been printing and what impact has it had on Bitcoin? In this article, we’ll look at the numbers and the possible correlation between the two.
So precisely how much has the Fed been printed since the pandemic started? The answer is a lot! In March 2021, it is estimated that 35% of all US dollars in existence have been printed in the last 12 months (see below graph from the US Money Stock). And this does not include the latest $2.9 trillion Stimulus Plan from President Joe Biden, which has recently started to be sent out in $1,400 checks (among other incentives) to Americans. Factoring that in, it means the US Government has printed well over 40% of all US dollars in existence during the last 12 months… you read that accurately – 40%! And it could continue as the President has already announced an additional new Stimulus Plan of $3 trillion (source: Reuters).
So, you might wonder, what is the correlation between the supply of USD and Bitcoin? Well as the US prints more and more money, investors are getting concerned about the value of their investments or their saving accounts in USD.
To protect some of their assets against devaluation, many US investors have turned to Bitcoin and Cryptocurrencies. The below graph shows the price action of Bitcoin since the US started printing money in April 2021. After dropping in March 2021, due to fears created by the COVID pandemic, Bitcoin price has soared a whopping 1200% to date!
Although the printing of USD is certainly not the only factor that has pushed the price of Bitcoin so high (one could also factor in the last Bitcoin halving from May 2020), it has played an important role.
Bitcoin is not the only coin that has benefited from the stimulus packages in the USA. The below chart shows the entire market capitalization of the cryptocurrencies asset class. It has also soared by 1200% to date. This being said, it’s important to remember that at the time of this article being written, Bitcoin accounts (on its own) for nearly $1 trillion of the total market capitalization of $1.7 trillion (Source: CoinCap). In other words, Bitcoin accounts for nearly 60% of the value of the entire asset class.
In conclusion, it would be fair to say that the printing of the USD has had a constructive impact on Bitcoin and the entire Crypto asset class during the last 12 months. As Joe Biden has mentioned, there could be even more to come, investors can remain optimistic with regard to the price of Cryptos at least for the short to mid-run (next 6 to 12 months). This being said, it is important to keep an eye on the US inflation or interest rates, as they could stop the euphoria.
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