To rid of the suspension of the economy, the US government is printing new money at a breakneck speed. The simplest way to understand this impact is to understand what impact COVID-19 has made on the economy. As a massive number of businesses were unable to reach their consumers, they went out of business. A huge number of people also lost their jobs under these circumstances. This meant that the regular money and income resources started to deplete.
When such a thing happens, the economy tries to make sure that people start to save a larger portion of their income. It allows the demand to go down and supply to increase. However, the US government is trying to offer people stimulus checks by printing more fiats. In this manner, people would be able to put more money into the market and jump-start the economy. However, under these circumstances, the probability of inflation increases many folds, and more people want to take refuge in cryptocurrencies as a store of value.
The Federal Reserves of the United States is Keeping Zero-Interest Policies to Mitigate the Risk of Inflation
As per the spokesperson from Federal Reserve, the agency is trying to maintain the easy monetary regime in place during the current crisis. While more money is printed, the value of the dollar will go down, and as a lot of new money rushes into the market, it would increase demand and decrease supply, resulting in a super inflation phenomenon.
The Federal Reserve has also kept supporting the zero-interest policy to mitigate the risks. On the other hand, the federal agency has been consistently spending $120 billion every month on regular asset purchases. This move has set off a new wave of inflation. The new estimates for inflation are as high as 3.4%. Up until a few weeks ago, these numbers were lower by 1 percent. Meanwhile, the central bank maintains that the new heavier streak of inflation would prove to be transitory.
A few months ago, only four Federal Reserve officers confirmed the idea that a massive inflation storm is coming their way. This number has now increased to seven members of the same agency. All seven officials claim that by 2022 the rates of the everyday commodities would showcase a visible increase. On the other hand, just about all FR employee claims that no price changes would be witnessed within the present year.
The impact of all these changes and opinions has made a grave impact on the price appreciation of Bitcoin. Since the Federal authorities have announced these decisions and policies, the volatility spectrum has been broken out once again in the crypto space. At press time, Bitcoin is struggling to cling to the $40K mark and resting at $38,700.