This morning, the price of bitcoin rose to 9,771 USD on the Hong Kong exchange Bitfinex. This marks a new all-time high for bitcoin and an increase in its price by a factor of more than 10 since the beginning of 2017.
Many experts claim that this growth is the result of reduced hype surrounding the US dollar. They believe that this is more a case of the dollar depreciating than the price of bitcoin rising.
Crypto-analysts claim that the US Federal Reserve has printed so much money in the last 10 – 20 years that not even the regulator actually knows how much USD is in circulation around the globe.
It’s worth noting that the Fed stopped publishing data about the M3 money supply back in 2006:
Below is a historical chart of M3:
We can see from the chart that the M3 money supply in 2006 amounted to 10.3tn USD.
At the end of 2008, the Fed announced they had opted for a “printing press” cure to the crisis as the first round of the regulator’s asset-purchasing program got underway. No one knows the current value of the M3 money supply in the US. Some members of Congress are long-time critics of the Fed and blame the regulator for turning the dollar into a bubble with no real backing.
I agree with this assessment. If you look at the Federal Reserve’s economic projections over the last 5- 6 years, you’ll find that they almost always miss the mark. It’s important to understand that the Fed’s main role is to regulate money supply (by forming monetary policy) to support economic growth (low unemployment and 2% annual inflation). The question is how can the money supply be efficiently controlled when the Fed itself doesn’t know how much money is in circulation (as I’ve stated above, this relates to the M3 money supply)? This is exactly why the Fed’s economic forecasts have been off for the last 10 years as well as why they’ve been unable to adequately conduct monetary policy. In other words, the Fed has become less efficient at its job and the supply of dollars has slipped form their control.
Crypto-analysts claim that during the next US crisis, not only will global investors shift towards cryptocurrencies (i.e. the dollar will lose its status as a safe haven and become a high-risk, unreliable asset), but American citizens will also look to exchange their dollars for crypto, bringing about a total collapse of the US dollar.
Crypto-analysts claim that with the collapse of the dollar, bitcoin will cost somewhere between 1 and 5 million USD. At the time of writing this review, bitcoin is trading at 9,712 USD with a market cap of 162.22bn USD.
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Forecasts which are made in the review constitute the personal view of the author. Commentaries made do not constitute trade recommendations or guidance for working on financial markets. Alpari bears no responsibility whatsoever for any possible losses (or other forms of damage), whether direct or indirect, which may occur in case of using material published in the review.
Director of Alpari's analytical department
Senior Alpari analyst
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