Crypto enthusiasts often talk about bitcoin as a hedge against inflation. Why?
The argument is that central bank money printing will lead to inflation or the decrease in the value of money over time. Bitcoin, by contrast, has a fixed limit of 21 million coins that can ever be created. This limited supply allows bitcoin to resist inflation.
The COVID-19 pandemic presented the ideal conditions to test this theory once countries across the world began injecting trillions of dollars into their economies. Many countries, including the U.S., printed money to meet stimulus requirements for its citizens.
Yesterday, the chairman of the U.S. Federal Reserve, Jerome Powell said the central bank welcomes higher inflation in 2021 as a sign that the economy is picking up again after the pandemic-slump.
Governments hoped an expansionary monetary policy, whereby central banks increased the amount of money available to people, would keep economies moving amid prolonged shutdowns of certain sections of the economy. By June 2020, stimulus action taken by countries had surpassed $10 trillion, according to a McKinsey Global report. U.S. government-spending alone amounted to $6.5 trillion in 2020, up 48% from the previous year.
“There’s a crazy amount of money being printed right now, so the value