Bitcoin can benefit from the strategy of central banks around the world to massively inject resources into the economy to minimize the damage caused by the coronavirus pandemic, according to an article published in Infomoney. And central banks would be falling into disrepute over their ability to fight crises, says Transfero Swiss’ CEO, Thiago Cesar.
“For every crisis, it seems that the only solution put forward is the injection of more capital. Nevertheless, the recoveries that happen after those measures are marginal. It turns out that they don’t have the desired effect. The economy, the assets, do not react positively and people start to fear a systemic crisis”, says the executive.
According to the executive, this discredit can be proven by the recent recovery in the bitcoin price and also by the increased demand for cryptoassets, especially in Europe. Data from Google Trends show that since March 8th there has been a surge in demand for the term “bitcoin coronavirus”, led by countries such as Austria, Switzerland, Ireland and Spain.
Central banks inject US$ 5 trillion
To get a look at the size of central banks’ operations, G20 countries are injecting more than US$ 5 trillion into the global economy. Only the Federal Reserve has launched securities repurchase operations (the so-called repo) that have passed US$ 2 trillion. A US$ 700 billion Quantitative Easing program has also been announced.
Not to mention the government package that’s about to be approved in the U.S. Congress. The figure reaches US$ 2 trillion, the largest ever made in the country. In addition, other similar packages have already been announced in Germany, France, Japan, among others.
What does the bitcoin gain from these measures?
According to InfoMoney analysis, this move should bring effects gradually. And one of them may be the appreciation of the bitcoin. According to the director of the Brazilian Cryptoeconomy Association (ABCripto), Safiri Félix, the bitcoin investment thesis is based on the concept of programmed digital scarcity, which was inserted into the asset protocol as the rule for issuing new currencies. “This is the antithesis of monetary loosening policies that began after the 2008 crisis and have now intensified”.
He also points out that in this scenario it is important to seek diversification in assets with less correlation and that serve as protection at this time of massive liquidity injection. On the other hand, Hashdex portfolio manager, João Marco Braga da Cunha, points out that issuing currencies puts pressure on inflation, which can cause investors to see the cryptocurrencies as an alternative. He also highlights that after the bitcoin halving, which is scheduled for May, there may be a reduction in supply and price increase. “Therefore, this possibility exists in our vision”.