Fed Balance Sheet Hits $8.357 Trillion, Is It Hastening Crypto Adoption?

This week the U.S. Federal Reserve’s balance sheet charted another all-time high. At an astounding $8.357 trillion, are the rapidly growing assets of the Fed speeding crypto adoption?

The Federal Reserve publishes updates to its balance sheet numbers every seven days. This week’s report was a doozy, revealing another $8 billion in assets purchased over the period.

The U.S. central bank has been busily hoovering up mortgage-backed securities and Treasury bonds, buying them with new dollars it creates at its own discretion.

Fed Balance Sheet Hits New Record High

The Fed’s balance sheet now stands at an incredible $8.357 trillion. Are we looking at a dollar bubble in the making? “There is no end in sight,” remarked crypto proponent Anthony Pompliano.

Source: Board of Governors of The Federal Reserve System (a right-side legend in millions of dollars)

The glut of newly created money pouring into America’s institutional financial infrastructure keeps interest rates glued to near-zero in the U.S. dollar economy.

The purpose of this in the Federal Reserve’s parlance is to help it achieve its twin mandates from Congress to stabilize prices and maximize employment.

The Credit as Money Economy

But really, the purpose is to steadily and easily notch up prices, so dollar users are incentivized to spend their dollars sooner rather than hold them and wait to spend.

The monetarists want to see goods and money exchange hands more often and use quantitative easing to grease the wheels of the market.

They also fear a deflationary episode, with Jerome Powell warning against a deflation-driven economic depression during and before the coronavirus pandemic.

Borrowing at zero percent interest is a really great deal, actually kind of impossibly great. No one who couldn’t create more of their own money supply at their own discretion to lend would lend their own money for no interest. It’s an artificial construct of the monetary system that would not make sense in someone’s personal or business finances.

So who’s paying for it? Everyone buys things that cost more because of it. Higher food and commodity prices subsidize those zero percent interest rates. Higher equities and housing prices too, and higher tuition prices with all that low interest student debt to pay back.

Are Central Banks Hastening Crypto Adoption?

Is it hastening crypto adoption? You bet it is. Investors who see monetary expansion radical even by 2008’s standards are protecting and growing their savings in cryptocurrencies and other digital asset instruments. As Nasdaq recently reported:

“Inflation fears are apparent with economic contraction and government stimulus increasing the global money supply. Bitcoin has positioned itself as a perfect hedge against inflation. Unlike fiat currency, bitcoin is not regulated by the central bank.”

The Nasdaq report emphasized how strong this narrative is, how much investors believe in it, and how validating Bitcoin’s performance against the dollar has been. Advising readers how to include cryptocurrencies as part of an inflation-proof portfolio on Saturday, Benzinga warned:

“With the U.S. CPI having increased beyond 5.4%, inflation is already here in a very real way… Investors who are not taking a look at the allocation of their asset portfolios may find themselves with a reduced future long-term spending power.”

While the Federal Reserve is essentially skimming other people’s money and lending it out at zero interest, investors on DeFi (decentralized finance) cryptocurrency lending platforms are lending their own money for massive, sometimes double-digit annual percentage yields. Meanwhile, others are parking their savings in deflationary digital assets like Bitcoin.

The central banks are pumping liquidity into decentralized banks with every round of money printing.

The U.S. Federal Reserve’s balance sheets reached a new all-time high this week. Are crypto adoptions being accelerated by the Fed’s rapidly increasing assets, which now total $8.357 trillion?

Every seven days, the Federal Reserve releases updates to its balance sheets numbers. The report this week was quite revealing, with $8 billion more assets acquired over the same period.

The U.S. central banks have been busy buying Treasury bonds and mortgage-backed securities with new dollars that it creates at its discretion.

Fed Balance Sheet reaches new record high

The Fed’s current balance sheet stands at $8.357 trillion. Is there a dollar bubble? “There is no end,” noted Anthony Pompliano, a crypto proponent.

Source: Board of Governors of The Federal Reserve System. A legend in millions of dollars, it is right-side legend.

Interest rates in the U.S. dollar economy are held at near zero because of the new money that is being created.

This is the Federal Reserve’s way of saying that it wants to fulfill its two mandates from Congress, which are to stabilize prices and maximize job.

The Credit as Money Economy

The purpose of the dollar is to increase prices steadily and easily, so that people who have dollars are incentivized not to hold onto them but to spend them sooner than they wait.

Monetarists desire to see money and goods exchange hands more frequently and they use quantitative easing to smoothen the market.

They fear a deflationary episode. Jerome Powell warns against deflation-driven economic depression before and during the coronavirus pandemic.

It is quite a deal to borrow at zero percent interest. Nobody would lend money to someone who can’t make more money at their discretion. This artificial monetary system is not appropriate for someone’s personal or professional finances.

Who is paying for it? It’s a fact that everyone buys items that are more expensive because it is. These zero percent interest rates are subsidized by higher commodity and food prices. Higher housing and equity prices also subsidize zero percent interest rates. This is in addition to higher tuition costs and the low interest student debt that must be repaid.

Are Central Banks Hastening Crypto Adoption?

It is accelerating crypto adoption. It is, you bet. Investors who see monetary growth as radical even by 2008 standards are investing in cryptocurrencies and digital asset instruments to grow and protect their savings. Nasdaq reported recently:

“Inflation fears are evident with economic contraction and government stimulation increasing the global money supply. Bitcoin is positioned as an ideal hedge against inflation. Bitcoin is not regulated by any central bank, unlike fiat currency.

This narrative was strong, investors believe it is solid, and the validity of Bitcoin’s performance against USD has been highlighted in the Nasdaq report. Benzinga advised readers on Saturday how to include cryptocurrencies in an inflation-proof portfolio.

“The U.S. CPI has risen beyond 5.4% and inflation is now very real… Investors who don’t take a look at their asset allocations could find themselves with reduced long-term spending power.”

The Federal Reserve is effectively taking other people’s money, and lending it at zero interest. However, DeFi (decentralized financing) cryptocurrency lending platforms allow investors to lend their money for huge, sometimes double-digit, annual percentage yields. Others are investing their savings in digital assets such as Bitcoin to avoid inflation.

With each round of money printing, the central banks pump liquidity into decentralized banks.