Bitcoin Will Save The World From Inflation

The continued spread of coronavirus infection keeps wreaking havoc in the global financial markets. According to the recent data from Johns Hopkins University, 1 million 986 thousand confirmed cases have already been registered globally with death toll count reaching 126 800. The United States has recently become the new epicenter of the pandemic, where the total number of coronavirus cases has exceeded 609 K.

A significant deterioration in the situation with COVID-19 has caused the International Monetary Fund to revise its global economic growth forecast. Based on the IMF report on World economic outlook released on Tuesday, global GDP is projected to contract by 3% in 2020. According to the information contained in the report, the coronavirus-related disruption will result in the United States' gross domestic product decline by 5.9% this year. In the Euro area, the IMF experts predict the economy to shrink by 7.5%. It’s worth noting that the IMF gives a rather optimistic assessment of the economic consequences of the pandemic, which is primarily based on expectations that quarantine measures in the affected regions will last for the next three weeks. Given that countries can remain isolated throughout the second quarter of 2020, the real economic downturn may turn out much more significant and recession may be the worst since the Great Depression.

Such gloomy economic prospects are pushing global central banks to introduce more proactive fiscal policies by injecting hundreds of billions of dollars of extra liquidity into their national economies. On March 19, the Governing Council of the European Central Bank decided to launch a € 750 billion pandemic emergency program in an attempt to promote financial stability amid escalating diffusion of the coronavirus. On March 25, the US Senate approved a $ 2.1 trillion stimulus package. In addition, another $ 2.3 trillion was allocated by the Federal Reserve System. The Australian government has also announced a massive fiscal stimulus package (nearly $20 billion) to tackle the impact of the coronavirus pandemic. On 22 March Australia pledged a second $66bn worth economic rescue package. As you can see, we are talking about unprecedented liquidity injected in the global financial system, which subsequently will inevitably lead to an increase in global inflation and depreciation of traditional currencies.

Interestingly enough, Bitcoin appeared in 2008 during the previous financial and economic crisis, which had swept the global economy. At that time, global world central banks had been also actively printing money, albeit in smaller volumes, trying to mitigate the effects of the global recession. Bitcoin was a logical response to the understandable desire of market participants to save themselves from inflation. To do this, they needed an asset with a fixed emission, that is, is deflationary in nature. Today, the situation with the crisis is repeating itself, but Bitcoin needs no introduction anymore. It has gained huge popularity over the past three years. The creators of Bitcoin were well aware of the inflation problem, so they developed an alternative form of storing funds in a modern digital format instead of tangible assets (precious metals and stones). Bitcoin is not only a new technology based on the blockchain, but it may well become the instrument that will put an end to inflationary risks and stabilize the global economy. If so, then the current crisis can take BTC/USD up to new highs that we haven’t seen even 2017.