INK Ultra Money: Dollar printing versus crypto scarcity

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Investors are back to square one when it comes to looking for yield as the Federal Reserve, in some cases with the backing of the Treasury, works to keep Treasury and corporate bond yields low. There are some big consequences of the easy money policy for many asset classes including stocks, foreign exchange, and cryptocurrencies.

Will the hunt for yield lead to Bitcoin and Ethereum?

One impact which does not get a lot of attention yet is the breeding of corporate zombies. As these zombies spawn on the back of Fed and Treasury bailouts, they haunt healthy companies making it hard to raise prices and generate profits. The zombies are D-economy warriors and are allies of the stock market bears and US dollar bulls.

If we were left to the zombies, the economy would probably be doomed. However, governments around the world have been expanding their deficits and using their newly raised cash to bailout consumers and boost economic activity. This favours the dollar bears and inflation given the constrained supply chains the world faces in the wake of COVID-19 constraints on economic behaviour. 

As the forces of D and G collide, dollar bulls and bears battle over their fate of the greenback. We get a fantastic example of that today on Real Vision as dollar bull Brent Johnson, CEO of Santiago Capital, interviews dollar bear Lyn Alden of Lyn Alden Investment Strategy. Lyn brilliantly explains how dollar bears are essentially fighting the Fed's determination to keep the Treasury bond functioning. On balance, I would tip the debate in Lyn's favour.

The US dollar may be oversold now

Meanwhile, as the Fed works to fund the US Treasury and suppress dollar strength via low rates, money printing and just-in-time swap lines for foreign central banks, the oppression of savers becomes a second big and intended consequence of lose money policy.

Yield oppression encourages investors to hunt for yield, but attractive returns are scarce. Because of that scarcity, I believe it is only a matter of time before more investors are attracted to the digital currency world where there are growing number of applications that offer yields above what investors could earn on a portfolio of US high-yield debt. Many digital currencies also offer a degree of scarcity either through their algorithms or limited issuance that stand in stark contrast to the unlimited printing press of the Fed.

Right now in the hunt for crypto-based yield, Ethereum-based applications seem be in the lead but the race for dominance has just started. Today, INK Research looks at a tiny company that is focusing on providing processing capabilities on the Bitcoin SV network. A free version is now available on INK Ultra Money Free.

Betting on bigger blocks

The hunt for yield may be one factor that reignites investor interest in digital assets. If bitcoin and other digital currencies can hold their ground during the next stock market sell-off, we may have confirmation that a new sustainable bull market in digital assets is underway.

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