“It is a world of fiscal dominance that will ultimately dictate Fed policy. Rates will necessarily need to be kept artificially low and liquidity will need to be provided to help fund the refinancing cycle,” the founders told CoinDesk. “The ‘depreciation’ trade was a popular narrative last year, but it has gone quiet. Yet it is about to move into high gear!,” the founders told CoinDesk.
Several observers have sounded the alarm about the skyrocketing debt in recent months.
Apollo chief economist Torsten Slok warned that the US debt-to-GDP ratio of more than 120% means there is little room to spend more money in a recession. Additionally, the Fed cannot cut interest rates as aggressively as in previous recessions, because doing so would increase inflation and, more importantly, reduce bond yields. The government must issue more bonds to finance deficits and these must offer a high yield to attract demand.
“The United States has never entered a recession with this small fiscal buffer,” he wrote on his blog in May.
All of this means that if a recession occurs, the pain could be more lasting and trigger demand for assets that are largely outside the financial system, such as BTC and cryptocurrencies. That said, since its inception in 2010, BTC has evolved largely as a technology stock and not a safe haven investment.
