Former Federal Reserve Governor Kevin Warsh says policy at the central bank is weakening the dollar relative to assets outside US government control.
In this environment, Warsh believes an allocation to bitcoin “makes sense.” Warsh made his comments as Democrats took control of the US Senate earlier Wednesday.
The election results will likely increase further stimulus measures.
Fed Policy Making Bitcoin Increasingly Attractive
Speaking in Atlanta on Monday, President-elect Joe Biden promised voters that previously allocated $2,000 stimulus checks would arrive quickly if Democratic candidates won Tuesday’s US Senate runoffs.
The checks form part of a Federal monetary policy that Kevin Warsh calls “incredibly aggressive.” The former Fed Governor told CNBC’s Squawk Box that he expected the US central bank’s coronavirus response to be the planet’s largest.
As BeInCrypto has reported previously, the central bank’s balance sheet has already ballooned since the start of the pandemic.
"It does make some sense to me," says Former Fed Governor Kevin Warsh on #bitcoin's bull run. "The dollar is weakening, and after the elections overnight I'd look for the dollar to continue to weaken against a large basket of currencies." pic.twitter.com/4r0SX2eX7O
— Squawk Box (@SquawkCNBC) January 6, 2021
For Warsh, such loose monetary policies strengthen the appeal of assets outside of US control. Of those assets currently “going through the roof,” he mentioned bitcoin as being “the anti-government price” and gold as a “barbarous relic that’s been around for 5,000 years.”
Bitcoin makes sense as part of a portfolio in this environment where you have the most fundamental monetary policy shift since Paul Volcker.
Warsh: “If BTC Never Existed, Gold Would be Rallying Even More Right Now”
Warsh also said that bitcoin looked likely to eat into gold’s market going forward. The cryptocurrency is increasingly believed to share properties with the precious metal, particularly among younger investors.
The former Fed Governor commented:
“If you’re under 40, bitcoin is your new gold.”
BeInCrypto has reported previously on gold outflows coinciding with large BTC inflows. Last month, for example, the Jeffries Financial Group cut investments in gold and took a bitcoin position.
Previously, the pension fund had a 50% allocation to the precious metal. While remaining bullish on gold, it diverted 5% of this exposure.
JPMorgan strategists also anticipate bitcoin taking market share from gold. After writing that institutional bitcoin buying looked set to continue last month, the bank’s analysts on Tuesday gave a long-term BTC target of $146,000.
Bitcoin’s appeal as a hard monetary asset continues to spread among some of the most conservative institutions. In December, the 169-year-old life insurance firm Massachusetts Mutual announced its own $100 million bitcoin purchase.
Warsh believes that confidence in bitcoin as a hard monetary asset is growing. He told CNBC:
“With every passing day, bitcoin is getting new life as an alternative currency.”
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