Economy
Ripple’s Garlinghouse: Printing of Fiat Currency is Cause of Crypto’s 2020 Price Surge
“Here in the United States you see trillions of dollars of stimulus and that means we’re inflating the U.S. Dollar.”
According to Ripple CEO, Brad Garlinghouse, the 2020 price surge in the cryptocurrency market is being driven by investors looking for a hedge against the money printing being undertaken by governments around the world.
Appearing on CNN Business on Wednesday Garlinghouse, who’s company is behind the XRP cryptocurrency, explained that the “non-inflationary” nature of some cryptocurrency is becoming a more attractive place for investors to park their capital as governments inflate their native central bank issued notes.
“I think one of the most macro important dynamics that is driving the crypto market is the fact that many governments around the world are printing more fiat currencies,” Garlinghouse explained.
“Here in the United States you see trillions of dollars of stimulus and that means we’re inflating the U.S. Dollar. And when you inflate the U.S. dollar there’s many people that want to hold non-inflationary assets. You’ve seen the same dynamic earlier with gold and the year gold has had. So, I think people are seeing crypto in some cases as an inflationary hedge.”
Amongst other important dynamics driving the market, according to Garlinghouse, is the entrance of big name investors from the legacy financial world.
“You’re seeing names like Paul Tudor Jones and Stan Druckenmiller come into crypto and see it as an investable asset and I think that those are important dynamics that are driving this market,” he said.
Crypto’s 2020 Rise
As of writing, the total market cap of all crypto currencies is up just over 190% year to date …
Bitcoin is up close to 160% since the start of the year as it butts heads with its 2017 high of $20k …
Ethereum, the worlds second largest cryptocurrency by market capitalization, is up a whopping 344% YTD …
And since Garlinghouse is on the front of our minds, Ripple’s XRP is up over 200% YTD …
World Wide Money Printing
Many looking at the way governments are handling their fiat currencies, especially now in the wake of the economic destruction of government lockdowns and other COVID restrictions, are on the same page as Garlinghouse as far as the correlation between the price increase across the crypto market and central bank and government money printing.
Ethan Young at the American Institute for Economic Research is one of those people that agree … as government’s print, scarce assets in crypto like Bitcoin will prosper.
From Young’s article published November 23, titled, “Important Factors Driving Bitcoin’s Drastic Growth in 2020“:
It is undeniable that the monetary limits of fiat currency are being tested around the world as governments print trillions of dollars for stimulus packages in reaction to Covid-19. The World Resources Institute writes
“For the first time U.S. debt is now about equal to GDP (Gross Domestic Product), like the sound barrier we once thought if we hit it we might explode.”
This level of spending and money creation has likely driven many investors to Bitcoin, as it may serve as a safe haven as the value of fiat currencies like the US dollar comes into question. Furthermore, it is uncertain how the stock market, which has been the main beneficiary of quantitative easing, will react when such policies eventually subside.
Since the 2008 recession, money injections from the Federal Reserve have continued at a constant rate and the value of the S&P 500 has moved in step with spending. This creates a disconnect between financial markets and the actual productiveness of the economy. Bitcoin may serve as an alternative investment vehicle for those who are wary of an unsustainable securities market.
An article in MarketWatch explains that
“Worries that governments are printing heaps of money to paper over problems created partly by the 2008 financial crisis was at least part of the reason that bitcoins were created over a decade ago. That thinking is also the basis for this resurgence in bitcoin, crypto experts said, as the COVID-19 pandemic forces governments and central banks to spend to limit the economic hit.”
Such caution is not unfounded as the Federal Reserve’s balance sheet has ballooned to unprecedented levels in the past few months, going from $4.31 trillion to $7.18 trillion.
The monetary policies post-2008 kicked off interest in cryptocurrencies and it would not be irrational to assume that the current policies would be encouraging an accelerated timeline for the adoption of Bitcoin.
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And just to drive the point home …
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Joseph Jankowski is the Editor-at-Large for Planet Free Will. His works have been published by major news publications such as ZeroHedge.com and Infowars.com.