Constantly rising inflation has forced central banks around the world to tighten their monetary policies by aggressively raising interest rates and reducing the amount of liquidity circulating in the market. This put the gold and Bitcoin prices under pressure. However, things seem to be changing now.
Gold and Bitcoin will be the biggest winners!
Analysts say central banks’ quantitative tightening (QE) has drastically reduced the global money supply. Some economists are raising the alarm that this will lead to a recession and deflation. In addition, some economists state that the global money supply has decreased by 6.6% in the last 12 months as of February. According to some reports, this is the most significant contraction in over 50 years.
Despite the current environment, a research firm notes that monetary inflation has not disappeared. He says this would be good for gold, Bitcoin and other inflation hedges. Last week, Crossborder Capital said gold prices could exceed $3,000 and Bitcoin could reach $100,000 in the next decade as central banks will have to cover rising government spending. Analysts include the following assessments in the report:
A major rise continues in the Global Liquidity cycle. This would mean potentially massive monetary inflation, fueled by the need for Central Banks to plug rapidly widening holes in government finances. The enormous size of the US (and others’) debt burden will force a swift and permanent return to QE-type policies. As monetary inflation rises, asset prices will also rise. But traditional monetary hedging tools like gold and new ones like Bitcoin will be the biggest winners.
QE is coming back, according to analysts
Citing the latest data from the Congressional Budget Office (CBO), analysts say rising costs, aging population demographics and slower tax revenue growth will continue to drive the growing deficit. Analysts expect government debt to nearly double from $24.3 in fiscal 2022 to $46.4 trillion by 2033, according to CBO estimates. In this context, analysts make the following statement:
This represents 118.2% of future GDP and an annual growth rate of 6.1%. The Fed will be asked to finance most of this debt. Because it seems likely that foreigners, China, which owns one-third of the US government debt, will borrow less in the future.
Looking at the Federal Reserve’s balance sheet, Crossborder says it could rise to 2022 levels by 2029 and at least 50% higher by 2033. However, the report notes that monetary inflation is likely to increase by 75% over the next ten years. QE is coming back, according to analysts!
This will easily push gold prices up to $3,000!
While the British research firm uses US data for its research, analysts point out that rising debt is a global problem. They say the US is probably “the cleanest dirty shirt in the laundry basket”. “The demographic pressures are greater outside the US,” analysts said. Spending commitments are greater. Also, many foreign tax bases have already dried up,” he says.
Looking at the impact of these increased spending on gold, Crossborder regression models indicate that a 10% increase in global liquidity led to a 14% increase in monetary hedges. Analysts offer the following explanation based on this:
Using these simple extrapolations, a 75% increase in monetary inflation would easily push bullion prices to $3,000, even using the 2022 average price as the base.
Is Bitcoin going to $100,000?
cryptocoin.comAs you can see, the market is showing signs of recovery. Analysts say that Bitcoin is even more sensitive to market liquidity than gold. In other words, they state that a 10% increase in the Fed’s balance sheet can lead to a 75% increase in cryptocurrencies. Analysts conclude from this:
A possible 75% increase in liquidity means a more than 500% increase in crypto prices. This shows that Bitcoin can easily be traded at $100,000. Of course, this cannot happen! Or can it be?
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