Author name: @nobumei (https://twitter.com/nobu_mei)
<aside> đź’ˇ This section explains the global inflationary situation that is the reason why Bitcoin is attracting so much attention.
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In the previous sections, I explained the fact that Bitcoin's protocol of mining and half-life makes it easy for the BTC price to rise. In this section, we will look outside the Web 3.0 market for once and explain the global inflationary situation that is further accelerating the rise in the price of BTC.
So far in this chapter, we have talked about the "rapidly growing Crypto market, led by BTC," but the first assumption is that $2 trillion worth of completely new assets did not just come into existence one day.
The total amount of assets in the world as a whole does not increase rapidly on a monthly basis. The GDP growth rate, which is considered the country's growth indicator, is designed to inflate by 2-3% every year. The growth rate of Web 3.0 exceeding several dozen percent per year is clearly an offshoot where the goal is 2-3% growth by global standards, so it is more natural to assume that value is flowing into the digital asset market from assets in existing markets than to think that a new market has suddenly appeared. I would say that it is leaking out.
The trend is like this when considered in the diagram.
Value is flowing out of the existing financial asset market into the Crypto asset market.
Why is this so? In this lecture, we will look at the reasons for this and at BTC, which is beginning to emerge as digital gold.
The most recent major trend is the fact that “The value of legal tender currency is becoming diluted as legal tender currency continues to increase”. As a result of the COVID-19 disaster, countries have printed plenty of legal tender, which has caused massive inflation in reality, although it is not visible. Therefore, there is a trend, especially among individual investors, to give up old-style assets and move assets into crypto assets.
For example, the market for dollar deposits and savings in circulation in the U.S. is $16 trillion, while economic policies in the last year have printed $5 trillion.
The simple fact is that the value of the dollar you have now has dropped by 3/4.
Let's look at the actual data.
In general, the size of a central bank's balance sheet can be used to see how much of the currency it controls is in the market. When the central bank eases monetary policy, buys assets such as government bonds, or prints legal tender to increase lending, the money goes to the market. Therefore, the balance sheet can be used as an indicator of the level of inflation.
The U.S. balance sheet had gradually started to shrink until the COVID-19 epidemic, as the FRB, the monetary policy decision-making body, had been conducting quantitative easing since the Lehman shock, in conjunction with the stock market and economic recovery over the past few years.
This coincided with COVID-19, which led to large-scale additional monetary easing, resulting in the purchase of assets, mainly government bonds, at a pace that exceeded the Lehman Shock, and a significant expansion of the balance sheet.