How will the Bank of England’s new policy help popularise cryptocurrencies?
Renowned investor and billionaire Stanley Druckenmiller predicts cryptocurrencies will play a “big role” in the world of future finance amid a massive loss of people’s confidence in central banks. He said this during an interview on CNBC. One of the main themes of the interview was the Bank of England’s sudden turn to quantitative easing policy, which is essentially printing new amounts of money. This, in theory, will lead to higher inflation, a depreciation of conventional money, and a possible increase in interest from ordinary people in digital assets, which are protected from such supply manipulation. We describe the situation in more detail.
Note that quantitative easing policies were implemented in the US as the pandemic spread. At that time the authorities handed out a certain amount of money to the citizens, which in theory was supposed to help them cope with the consequences of the problems in the economy.
According to Galaxy Digital CEO Michael Novogratz, it was the pandemic that was the key to the new bull run in the cryptocurrency market. You can read more of his viewpoint here.
Handing out money in the US in 2020
Why will cryptocurrencies become even more popular?
According to CryptoSlate sources, UK Chancellor Kwasi Kwarteng unveiled a tax cut package on September 23 to give a boost to the weakening economy. The package includes a cut in income tax, a tax on the purchase of real estate and the abolition of a planned increase in business rates. Kwarteng said the new policy would boost Britain’s competitiveness and stimulate employment as well as business investment.
At the same time, government borrowing will increase by another £72 billion, or the equivalent of $78.08 billion, to fund tax cuts. Already on September 28 the Bank of England was forced to buy these securities for 65 billion pounds or 70.6 billion dollars to prevent the collapse of the British government bonds prices. This step was caused by a liquidity crisis in pension funds because they could become insolvent without further intervention.
Bank of England
However, the brunt of the bailout of the pension funds infrastructure will fall on the shoulders of taxpayers. In addition, some critics argue that the intervention was a deviation from monetary policy aimed at curbing rising inflation. All this is a clear sign of fickleness in the policy of the country’s central bank, while significantly undermining public confidence in the institution.
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A complete reversal in the Central Bank’s strategy suggests that the Bank of England will not be able to “hush up” years of currency printing and low lending rates without a serious collapse in the economy. And Wednesday’s intervention was only a clear confirmation of that fact. Druckenmiller believes that the public is losing faith in the banking system. He sees crypto as part of the transition to a better financial system.
I see cryptocurrencies playing a big role in the New Renaissance because people are just not going to trust central banks.
Investor and billionaire Stanley Druckenmiller
Cryptocurrencies are indeed growing in popularity, with this growth happening much faster in some parts of the world. According to analytics platform Chainalysis, the Black Africa region recorded the largest volume of crypto-transactions worth over $100.6 billion equivalent between July 2021 and June 2022.
According to the report, in sub-Saharan Africa, crypto-transfers of relatively low value account for 95 per cent of all transactions in the region. Meanwhile, transfers of less than a thousand dollars accounted for 80 percent of cryptotransactions in the aforementioned period, more than any other region in the world. By comparison, the same figure for North America is at 70.5 per cent.
Share of custom (relatively small) cryptotransactions in their total volume across different regions of the world
The report also says that fluctuating national currency values in some countries in the region, like Kenya and Nigeria, provide an additional incentive for trading in cryptocurrencies – and especially stabelcoins. Many investors in the region are investing in staplecoins to preserve their savings amid the volatility of national currencies. As you can see, in a tough economy, some ordinary people have found a way out – investing in cryptocurrencies.
We believe that the mass printing of money around the world could indeed lead to the popularisation of digital assets over time. Still, the same Bitcoin has a limited supply and fixed inflation, which on top of that halves every four years or 210,000 blocks. At the same time, other cryptocurrency networks like Avalanche practice burning crypto-assets paid as commissions, making such assets deflationary. So coins even now have something to attract users. And once bankers act accordingly, there will only be more reasons to do so.
What do you think about this? Share your opinion in our Millionaire Crypto Chat. There we talk about other important topics from the blockchain world as well.
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