Bitcoin could benefit from Fed-led inflation, says Diginex CEO

As the Federal Reserve pours trillions of dollars into the United States’ economy to combat the coronavirus crisis, cryptocurrencies are becoming increasingly appealing to institutional investors, according to Richard Byworth, CEO of Hong Kong-based digital financial services company Diginex.

Byworth argues that the Fed’s plans to raise inflation rates, coupled with political uncertainties around the upcoming presidential election, could lead to investors seeking digital assets as a way to hedge their portfolios. 

“I think that we’ve got to a point with central banks where there’s no reversing it,” said Byworth in an interview with media partner Forkast.News. “Obviously Trump wants to get re-elected, he’s not about to let the Fed stop easing or printing money—and so when you look at Bitcoin as a scarce digital asset, that’s something that’s really starting to create awareness around investors looking to hedge their portfolio with institutional and retail.”

Bitcoin gets its moment as US Fed considers inflation raise

The US Federal Reserve will soon be drafting a policy outline that favors low-interest rates and higher inflation as it pursues a return to pre-pandemic levels of economic activity, people with knowledge of the matter told CNBC on Tuesday. Past statements from Fed officials and economists, noted analysts, suggest an “average inflation” target of above two percent annually would be both tolerated and desired. However, these came with various economic outcomes. And for Bitcoin, it’s a positive one...

Recently, the Fed has outlined plans to seek low interest rates for years, actively pursuing higher inflation as it attempts to recover a pre-pandemic level of economic activity; previous statements from the Fed and economists point toward an “average inflation” rate of over 2% annually would be tolerable.

Good for Bitcoin, bad for the dollar

Well-known investors such as Paul Tudor Jones and Tim Draper have been bullish on the growth of cryptocurrencies, and Draper has even bet that the price of Bitcoin could surge to $250,000 by 2023.

“I think that the route to getting to a $250,000 price in Bitcoin means that you’ve seen a significant devaluation of the dollar price,” said Byworth. “I think it can get there if the Fed were to continue down a road of loss of control of the printing press... from my own perspective I see a lot higher price from where we are today even the next six months.”

The biggest change over the last year, Byworth argues, has been the introduction of cryptocurrency futures products across broad exchanges. "That’s really seen the growth of the derivatives market scale from being very, very limited to where we are today," he explained. 

Grayscale large cap fund shifts focus to Bitcoin and Ethereum

Digital assets management firm Grayscale has increased the weighting of Bitcoin and Ethereum in its Digital Large-Cap (DLC) investment fund—at the expense of other major altcoins. Grayscale announced in a Twitter thread on July 12 that the composition of its DLC fund had shifted moving into Q2 of 2020. Between March and June, the percentage of Bitcoin in the fund increased from 81% to 81.5%, while Ethereum’s weighting in the fund increased from 9.6% to 11.7%. The presence of three other major a...

Institutional investment into digital assets like Bitcoin has grown despite the coronavirus pandemic; the world’s largest digital assets management firm Grayscale Investment’s single-asset investment funds for Bitcoin and Ethereum totaled $3.5 billion and $410 million in July, respectively.