Yerevan (CoinChapter.com) — Stan Druckenmiller, the chief executive of Duquesne Family Office and an outspoken Bitcoin (BTC) supporter, voiced his disapproval of the Federal Reserve’s fiscal policies. He said the US dollar could lose its reserve status should the expansionary programs continue.
In an interview with CNBC Tuesday, the billionaire investor stated that the US central bank’s policies were on point when the pandemic was still raging on. However, the need to continue the programs doesn’t make sense, especially when the US gross domestic product (GDP) has recovered from its pre-pandemic levels on booming retail sales and job growth.
Mr. Druckenmiller added that holding interest rates down and buying trillions in bonds is “the most radical policy by a long shot.” He told the Wall Street Journal that the Fed “kept its foot on the accelerator too long,” which might leave the US dollar in a pretty bad state, owing to the collateral damage caused by heavy debts and deficits.
I can’t find any period in history where monetary and fiscal policy were this out of step with the economic circumstances, not one […] If they want to do all this and risk our reserve currency status, risk an asset bubble blowing up, so be it. But I think we ought to have a conversation about it at least.the veteran financial strategist stated.
Bitcoin vs. US Dollar
Mr. Druckenmiller also referred to the U.S. Dollar Index chart to confirm his bearish bias. In hindsight, the US dollar index is a measure of the currency’s strength against a basket of top global currencies: Euro (EUR), Japanese yen (JPY), British pound (GBP), Canadian dollar (CAD), Swedish krona (SEK), and Swiss frank (CHF).
The DXY measurement allows traders to study the demand of USD on the global market. It is down 12.44 percent from its March 2020 high of 102.979.
Economic turbulence affects both the US dollar Index and the cryptocurrency market. However, there is enough evidence to suggest the possible inverse correlation between DXY and BTC. When the Dollar Index experienced its 13% crash from March 2020 up to Jan 2021, BTC was booming. It logged a whopping 360% gain in the same period. A similar pattern is noticeable in most DXY and BTC bull-bear cycles.
Whenever traders see the DXY descending, they seek to hedge their portfolios against the turbulence. Traders and investors turn to the most stable cryptocurrency out there and secure their assets.
Bitcoin To The Rescue?
Mr. Druckenmiller agrees as he sees Bitcoin as a useful tool against the instability of the mainstream economy. The top executive also called bitcoin a “store of value asset,” adding that it is still too soon to tell which cryptocurrency will end up as the “ultimate champion.” But in his view, Bitcoin has the winning hand.
It’s going to be very hard to unseat bitcoin, as a store of value asset, because it has a 14-year-old brand, it’s been around long enough, and obviously, there’s a finite supply.Mr. Druckenmiller.
The investment mogul is worried that Fed is not taking the proper actions to prevent the devaluation of the US Dollar. He believes that the careless insistence on the current monetary and fiscal policies will harm USD’s status in the long run. Whether Bitcoin can provide a reliable hedge against the instability is not yet clear, Mr. Druckenmiller is positive that it is a possibility.