While the price of Bitcoin has slightly recovered in the past few days, many investors are still not confident enough to get back into crypto. It follows the events of “Black Thursday” on March 12 when Bitcoin lost nearly 50% of its value in just 24 hours.
Evidence of this lack of confidence can be seen in data on CME’s Bitcoin futures as well as Bakkt’s Bitcoin futures, which have dropped by 50% since the start of Match. It is a sign that there is less interest in Bitcoin futures. However, not everyone is fleeing from crypto. One of them is Mike Novogratz.
Novogratz Is Buying the Dip
Mike Novogratz, the CEO of Galaxy Digital who previously worked as a partner at Goldman Sachs, says he continues to buy despite the BTC price crash. Previously, he had predicted that Bitcoin’s next downside would be $6500. He made his prediction towards the end of October 2019. It is quite interesting that BTC is currently trading at around $6,600. At the time, many in the crypto sector doubted his prediction.
During a recent CNBC interview, Novogratz said that he had been buying the dig of both Bitcoin and Gold. According to him, he is doing this because of recent actions by central banks, which he claims have begun to “run amok” with their monetary policies during the COVID-19 crisis. He added that the debasement of fiat currencies and monetizing trillions of dollars of debt made it the perfect time to buy BTC.
Recent Actions by Central Banks
Novogratz was referring to recent policy decisions globally by central banks, which are re-inflating their economies. The reason for this is the supply-demand shock to the global economy due to the outbreak of COVID-19. Some of the most notable actions by central banks are:
· The BoE
The Bank of England also recently said that it would offer unlimited amounts of capital to businesses via cash facilities to assist them with the potential economic collapse due to COVID-19.
· The ECB
The ECB recently announced that it would buy 750 billion Euros worth of corporate and government bonds to help increase liquidity in the economy. It would help businesses to alleviate the financial damage caused by economic shock due to COVID-19. Currently, it has set the interest rate at –(negative) 0.5%.
· The Fed
The US Federal Reserve recently it would purchase any value of mortgage-backed securities, treasuring, local government debt, and corporate debt. It claimed this would ensure smooth market functioning and effective transmission of monetary policy.
Many other central banks have taken similarly drastic measures.
Inflation Makes Bitcoin Quite Lucrative
In the past twenty years, inflation around the world has been quite low. However, with the influx of free money that might soon enter the economy, there is a high chance that it could lead to heightened inflation.
A recent report by BITMEX claimed that the influx of money from monetary stimulus policies could be a major opportunity for Bitcoin to shine. Unlike the USD and other fiat currencies, Bitcoin is resistant to inflation. The reason is that Bitcoin has a fixed supply of 21 million coins. Thus, there is a high chance that the Bitcoin you own today will be worth much more in the future. However, due to the dumping of money into economies, the fiat currency you own today will likely be worth much less in 10 years.
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