Bitcoin and other cryptocurrencies have few supporters in Washington. Senator Elizabeth Warren cautioned that cryptocurrencies “puts the [financial] system at the whims of some mysterious, faceless bunch of super-coders” at a congressional hearing in July. The “truth” of cryptocurrencies, according to Treasury Secretary Janet Yellen, is that they “have been used to launder the proceeds of online drug traffickers; they’ve been a tool to support terrorists.”
Bitcoin’s supporters have not been deterred thus far. While only 4% of those over 55 possess cryptocurrencies, slightly more than one-third of those aged 35-44 do, as do two-fifths of those aged 25-34, according to a study of 3,000 adults conducted in the fall of 2020. Coinbase, the largest cryptocurrency exchange in the United States, had 68 million verified members as of mid-2021.
Digital money, like digital media and digital friendships, is obvious to younger Americans. However, Millennials with smartphones aren’t the only ones who are interested in bitcoin; a rising number of investors are rushing to the currency’s banner as well. According to surveys, as many as 21% of US hedge funds now own bitcoin in some form. ” What will be the winner in ten years’ time?” renowned hedge-fund manager Paul Tudor Jones wondered in 2020, after considering several asset classes such as stocks, bonds, gold, and foreign currencies. “I’m betting it’ll be bitcoin,” he says.
Consumers have faced higher price increases in recent months than they have in decades. One of the main reasons for the rise is that central bankers all around the world, including those at the Federal Reserve, attempted to compensate for Covid-19 lockdowns by inflating their currencies dramatically. As a result, approximately $4 trillion in newly printed dollars, euros, and yen made their way into the coffers of global financial institutions from central banks.
The current Federal Reserve chairman, Jerome Powell, claims that inflation patterns in 2021 will be “transitory.” In the short run, he may be correct. However, for the foreseeable future, inflation will be a significant and unavoidable burden for the United States due to a single factor: the fast growing federal debt, which is progressively fueled by the Federal Reserve’s printing machine.
Policymakers will eventually have to make a Solomonic choice: protect Americans from inflation or protect the government’s ability to spend deficits. It will be impossible to do both at the same time. The importance of Bitcoin will grow as a result of this compounded situation.