As the New York Fed confirmed on its website, so-called repurchase operations, or “repos”, totalled $89 billion on March 5 alone.
The United States Federal Reserve has funneled the equivalent of half the entire Bitcoin supply into the economy — but banks want even more money.
Repos are designed to provide temporary liquidity to lenders. As Cointelegraph previously noted, the practice is akin to conjuring fiat value out of thin air.
Coronavirus sparks liquidity scum
The Fed was reacting to economic weakness in the face of coronavirus, having already cut its interest rate target significantly this month.
Thursday’s liquidity spree was equal in value to approximately 9.8 million BTC — over half the total mined supply.
The overall demand for repo cash in recent weeks has meanwhile exceeded even the Fed’s own limit, the Wall Street Journal added on Friday.
Bitcoin commentators were already quick to sound the alarm over the health of the fiat economy, based on money that has no intrinsic value and which is not backed by any verifiable asset.
“Cut interest rates and print money. These are the tools of central banks”, Morgan Creek Digital co-founder Anthony Pompliano summarized last week.
More dollars, not more value
The coronavirus outbreak has highlighted the systemic instabilities of traditional markets. Stocks have seen historic volatility, while rate decreases and a drop in oil consumption saw many countries’ fiat currencies hemorrhage value.
Such fragility puts “hard” money such as Bitcoin in the spotlight. In a world which uses money with a verifiably limited supply which is impossible to manipulate, there is neither a need for foreign exchange markets, nor for “management” of the economy by central banks.
Bitcoin’s reliable supply means that it has a high stock-to-flow ratio. The creator of an accompanying model using stock-to-flow has shown that it is co-integrated with Bitcoin’s price and that that should, therefore, hit $100,000 at some point in 2021.
Bitcoin May Dip to $6.8K Without New Coronavirus-Style Event — Trader
Bitcoin may have come within 2% of $10,000 this week, but its 40% gains in 2020 are now making traders bearish about the future.
Speaking to Cointelegraph in a Market discussion on Feb. 7, two trading heavyweights highlighted what they consider to be the increasing potential for Bitcoin to lose value in the short term.
DiPasquale: BTC benefits from global instability
Alameda Research co-founder Sam Bankman-Fried was undecided on Bitcoin’s trajectory, while Bitbull Capital co-founder Joe DiPasquale identified $6,800 as a bear target for BTC/USD.
“I think if there is continued unrest — if things like coronavirus get worse… prices of gold and oil going up, I can see Bitcoin continuing to increase, and if not, then we could have a slide back to $6,800”, DiPasquale summarized.
The debate came as markets celebrated another week of solid gains for investors in both Bitcoin and altcoins.
As Cointelegraph reported, opinions remain mixed as to why Bitcoin has appreciated 39% since Jan. 1, with some considering global events as a catalyst and others highlighting Bitcoin’s solid technical fundamentals.
Like fellow trader Tone Vays, DiPasquale acknowledged that ultimately, more global instability would mean less money available for investment in Bitcoin.
Tom Lee’s $27K Bitcoin price not “reasonable”
When asked whether they agreed with bullish price forecasts for this year, notably Fundstrat co-founder Tom Lee’s 197% increase within six months, neither DiPasquale nor Bankman-Fried were convinced.
“If you were saying, ‘I expect a 10% increase on average over the next six months,’ that would be a reasonable claim, but 200%, that’s quite the bullish take”, Bankman-Fried said.
He added that Lee, well known for his bullish Bitcoin price talk, was not taking the full range of technical indicators into consideration.
Warning that BTC/USD could return to the $6,000 range meanwhile puts DiPasquale at odds with previous Cointelegraph guests, who said a retrograde step towards lows from December was unlikely.
That camp includes veteran trader Peter Brandt, who said that “strong hands” controlling Bitcoin would aid sustained growth. Those waiting for $6,000 and under had “missed the bottom”, he warned last month.
