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The gloves are truly off. In what is nothing other than a scathing attack on the crypto sector in general and Bitcoin in particular, the Minneapolis Federal Reserve President, Neel Kashkari, has tried to bludgeon the very ethos of Bitcoin in a recent public talk. Yet, with the US Dollar losing ~90 percent of its value in relation to Bitcoin over the past 5 years alone, we would continue to recommend a hefty dose of caution and humility to the purveyors of our modern monetary system.
₿𝗥𝗘𝗔𝗞𝗜𝗡𝗚: President of the Federal Reserve Bank of Minneapolis Neel Kashkari explains why he is skeptical of #bitcoin as a currency: pic.twitter.com/UrMhqr2zXq
— Documenting ₿itcoin 📄 (@DocumentingBTC) February 6, 2024
To wit, Kashkari raised three major points against Bitcoin in a recent public talk. He asserts that he has never met anyone who had bought a common staple using Bitcoin, questioning the cryptocurrency's role as a medium of exchange. He then cites the example of the post-pandemic inflationary impulse, where Bitcoin tanked with the rest of the risky asset universe, to posit that the cryptocurrency remains a "terrible inflation hedge." Finally, Kashkari thinks Bitcoin is nothing but a vehicle for speculation.
There is infinite cash at the federal reserve
— wholistic (@wholisticguy) October 15, 2024
Of course, Kashkari is on record for stating elsewhere that there is an "infinite amount of cash at the Federal Reserve." While we will not argue the merits of creating infinite liquidity out of thin air in this post, those who posit fiat currencies as the pinnacle of financial innovation and fortitude should google what an ounce of Gold bought in 1971 and what it buys today.
People often forget that the crypto sector is still a veritable toddler, with all of the teething pains that accompany a growth spurt that is a hallmark of this stage. There is, nonetheless, an evolving consensus that Bitcoin is an excellent risk-on hedge. And, we now know why.
As per a new study, Bitcoin moves in the direction of the global M2 supply a whopping 83 percent of the time! What's more, no other major asset displays such an elevated sensitivity to measures of global liquidity.
This means that, ironically, it is the action of Kashkari and the rest of his colleagues at the Federal Reserve that has supercharged Bitcoin's price gains. In effect, Bitcoin is a hedge against the Federal Reserve's monetary debasement policies, which necessarily result in inflation.
The end result: Bitcoin hedges against monetary debasement, which is a more holistic protection for your portfolio/net worth than what a mere inflation hedge might offer!
Goldman: to escape deflation and for the rally to be sustainable, China's M1 has to overtake its M2. For that to happen, China will need to unleash a historic credit impulse (record new debt creation, launch QE) and global inflationary shockwave. https://t.co/suSRIU8wJ5 pic.twitter.com/OCW6CjBM5S
— zerohedge (@zerohedge) October 6, 2024
Meanwhile, we noted in a recent post that the global liquidity proxy has now turned positive, which bodes well for Bitcoin's prospects. What's more, this trend is expected to strengthen as China prepares to unleash a gigantic stimulus, to the tune of 6 trillion Yuan, to offset its property market slump and turbo-charge waning demand in its economy. In fact, Goldman Sachs argues that China will have to unleash a stimulus of sufficient magnitude that increases its M1 supply of money over the M2 measure.
For the benefit of those who might not be aware, the M1 consists of currency in circulation plus checkable bank deposits. M2 equals M1 plus savings deposits and money market mutual funds. In other words, China's currency in circulation will have to rise above the country's savings to offset a deflationary spiral, as per the calculations by Goldman Sachs. This, of course, is music to Bitcoin bulls.
