The US Federal Reserve’s inflation failure will help push the price of Bitcoin higher, predicts the CEO of one of the world’s largest independent financial advisory, asset management and fintech organizations.
Nigel Green’s assessment of deVere Group, a top crypto advocate, comes as the US consumer price index jumped 7% in 2021, the biggest 12-month gain since June 1982. The widely watched inflation index rose 0.5% from November, beating forecasts.
He notes, “Last year the Federal Reserve said inflation in 2021 would be 1.8%.
“However, U.S. prices soared last year to their highest level in nearly four decades, depleting the purchasing power of U.S. households.
“Inflation is everywhere, and it could last longer than anyone would like.
“So why didn’t the Fed – the central bank of the world’s largest economy – see what was coming?
“Could they seriously fail to see how supply chain bottlenecks and shortages of skilled workers would drive up prices and erode the purchasing power of individuals and businesses?”
He continues: “It is certainly the biggest miscalculation in the history of the American central bank.
“It shows how dangerously out of step the traditional fiat system, of which it is a key part as it is responsible for maintaining price stability, is.
“I think this will fuel demand – and therefore the price of Bitcoin and other cryptocurrencies.”
Why is this so?
With Bitcoin’s fixed supply of 21 million and institutional investors increasingly moving away from the crypto market, it will continue to overtake gold as a haven for capital, says Nigel Green.
“Money flows where it receives its best treatment, and with real negative yielding Treasuries, moving capital to the Fed is an obvious liability for investors.
“Furthermore, in this current inflationary period, Bitcoin has outperformed gold which, until now, has always been almost universally hailed as the ultimate inflation hedge.”
Bitcoin is often called “digital gold” because, like the precious metal, it is a medium of exchange, a unit of account, non-sovereign, decentralized, rare and a store of value .
“Yet the Bitcoin cryptocurrency is superior to gold as a medium of exchange or a method of payment,” says Nigel Green.
“Unlike gold, it is a fixed and easily divisible and transportable unit of account. Gold is not readily divisible immediately, and there are potential purity and verification issues. While Bitcoin is easily traced on blockchain technology and this is going to be a huge advantage, especially in cross-border transactions.
He concludes: “The Fed has lost control of prices and investors are looking for safe havens to protect their purchasing power.
“Bitcoin is poised to provide the inflation shield that so many now seek, especially as our lives and the global economy increasingly rely on technological and digital solutions, and this megatrend is only going to become more dominant in the future.”