The Federal Reserve pumped more liquidity for the second consecutive day on Wednesday trying to keep interest rates from climbing higher.
The U.S. central bank has injected a total of $128 billion into the financial system — $53 billion on Tuesday and another $75 billion on Wednesday according to a businessinsider.com report.
The step taken from the central bank this week is for the first time since the 2008-2009 financial crisis 10 years ago.
What could this mean for bitcoin which has a $179 billion total market cap? First of all, it means that FED has injected just in 2 days an amount of new FIAT money comparable to 71% of bitcoin total market cap. We have already talked in our previous articles about the next financial crisis that would be an inflationary one.
In an attempt to keep the interest rates from going up the FED has to step in injecting more money to the markets, but doing so in an aggressive manner will result in driving up inflation rates. FED seems to be painted in a corner because in a desperate attempt to prevent the economy from slowing down, injecting new money to the markets to buy time, because at the end it will be the cause of this recession.
Similar scenarios happened in countries like Venezuela, Argentine, Turkey and other countries that have been hit by hyperinflation rates as a result of the aggressive injection of new FIAT money from governments in an attempt to cover the mess they have done, driving inflation rates at high levels.
We never saw how bitcoin would react in a financial global crisis but for sure we have seen how bitcoin reacted on a smaller scale on countries like Venezuela and other mentioned above. Bitcoin might act like digital gold in an eventual global recession and despite its high volatility in the long term has proven to be a store of value.
To conclude, printing new FIAT money would work as fuel for Bitcoin prices to skyrocket.