Mati Greenspan, founder of Quantum Economics, presented on how COVID-19 is influencing financial markets.
As governments shutdown, unemployment has surged. People rush to US dollars. When people start to sell stocks, bonds and BTC, most transactions end up in US dollars. Demand of dollars skyrockets. Government take actions to increase liquidity. Banks keep cash in their reserves, more than they have ever done.
When we talk about stimulus, there’re two things government and central banks can do. Stimulus taken by government is fiscal stimulus, where they borrow money and give out to people by aids or debt. There’s no way the US government could pay back national debt at $25 trillion. Second type is called monetary stimulus from central banks. Federal reserve is in charge of creating dollars. They are not literally printing, but inflate the balance sheet, which is about all the assets they own such as government bonds and mortgage-back securities. Historically, the central bank is not supposed to be a buyer in the market. But in 2008, for the first time ever, the federal reserve stepped into the market as a major buyer, buying assets using the money they just made up. Mati referred to injecting stimulus into the market to injecting heroine into a person’s body. Every time you need to inject a little bit more to get the same high. Federal reserve needs to print a little bit more to achieve the same effect.
At last, Mati talked about BTC halving. To him halving is not about going to 10k, but more like a celebration of hard money. Once every four years, everyone knows BTC is getting more scarce.