Highly regarded Bitfinex trader and crypto whale J0E007 is not banking on the hyperinflation narrative, which is a highly popular notion in the cryptoasset industry, implying it's a fairy tale.
This narrative, exhibited for example here, proposes that the aggressive fiscal and monetary intervention on the part of many central banks around the world will eventually lead to sharp devaluations in the values of many fiat currencies—and most importantly of the U.S. dollar.
Propagation of this concept of rampant fiat inflation in the cryptoasset space is generally tied to predictions of a huge increase in the price and/or market capitalization of Bitcoin and other cryptos, although most focus on the flagship cryptocurrency.
A Little More Complicated
In his post, JOE007 linked to a recent report from Alhambra Investments, an asset management and financial research outfit.
The report details lead analyst Jeffrey Snider’s view that the dollar is not going anywhere in terms of demand, although definitely not by virtue of the competence of the U.S. Federal Reserve in handling the unfolding economic crisis lit by COVID-19.
Conceptually, first, any strong desire to hold expensive dollar liquidity buffers is drawn from serious mistrust of systemic conditions – including the central bank’s place in them. If you thought Jay Powell well prepared in advance with effective countermeasures standing at the ready, buffers of any size need not apply.
In short, Snider contends that the Fed under chair Jay Powell has not responded appropriately to the emerging crisis with “effective countermeasures at the ready”; and this bungling in turn has led to a higher international demand for US dollars in order to sit on a larger and safer cushion of “expensive dollar liquidity buffers.”
A complicated subject, to say the least. The upshot for J0E007 being that the dollar-collapsing narrative may have some big holes in it—removing the keystone of that popular Bitcoin use-case narrative.
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