Jerome Powell Explains How the Fed Prints Money, Bitcoin Goes Above $9900

Yesterday (May 17), American TV network CBS aired an episode of its highly popular weekly news program “60 Minutes” that featured an interview correspondent Scott Pelley had done with the Federal Reserve Chair Jerome Powell on Wednesday (May 13). What Powell said during that interview could have helped the price of Bitcoin go above the $9,900 level earlier today.

When Pelley asked Powell what kind of “economic reality” people in the U.S. “need to be prepared for”, Powell replied:

“Well, I would take a more optimistic cut at that, if I could, and that is: this is a time of great suffering and difficulty.

“And it’s come on us so quickly and with such force, that you really can’t put into words the pain people are feeling and the uncertainty they’re realizing. And it’s going to take a while for us to get back.

“But I would just say this. In the long run, and even in the medium run, you wouldn’t want to bet against the American economy. This economy will recover… 

“It may take a while… It could stretch through the end of next year. We really don’t know. We hope that it will be shorter than that, but no one really knows.”

As for how much the U.S. GDP could decrease in Q2 2020, Powell said that the percentage decline “could easily be in the twenties or thirties.” However, Powell does “expect that there’ll be growth in the second half [of the year].”

Perhaps, the most interesting part of the conversation — as far as those people who are interested in Bitcoin as an inflation hedge is concerned — was the part where Pelly asked Powell if it was correct to say that the Fed “simply flooded the system with money.”

Powell said:

“Yes. We did. That’s another way to think about it. We did.”

Pelley then asked where this money come from and if the Fed had just printed it?

Powell answered:

“We print it digitally. So as a central bank, we have the ability to create money digitally. And we do that by buying Treasury Bills or bonds for other government guaranteed securities. And that actually increases the money supply.

“We also print actual currency and we distribute that through the Federal Reserve banks.”

According to data from CryptoCompare, shortly before this episode of 60 Minutes aired, Bitcoin was trading around $9,637, but within less than two hours after this episode ended, Bitcoin was trading at $9,925.

By around 03:15 UTC today (May 18), Arthur Hayes, Co-Founder and CEO of crypto derivatives exchange BitMEX was delightedly tweeting that the price for the September 2020 BTC futures contract had gone above $10K:

A gunslinger never sits with his back to the entrance. Watch the backend, XBTU20, rocket as we tear through 10k. pic.twitter.com/amCwsz6FCU

— Arthur Hayes (@CryptoHayes) May 18, 2020

One person who is not impressed with what the Fed is doing is Robert Kiyosaki, best known as the author of the “Rich Dad Poor Dad’ series of personal finance books, who predicted on Saturday (May 16) that the price of Bitcoin would reach $75,000 within the next three years:

ECONOMY dying. FED incompetent. Next BAILOUT trillions in pensions. HOPE fading. Bought more gold silver Bitcoin. GOLD @$1700. Predict $3000 in 1 year. Silver @ $17. Predict $40 in 5 years. Bitcoin @$9800. Predict $75000 in 3 years. PRAY for the BEST-PREPARE for the WORST.

— therealkiyosaki (@theRealKiyosaki) May 16, 2020

Anthony Pompliano (aka “Pomp”), Co-Founder and Partner at crypto-focused investment firm Morgan Creek Digital, is even more bullish when it comes to predicting where the price of Bitcoin is going in the medium term.

Pomp said during an interview with Yahoo Finance on Wednesday (May 13) that he expected Bitcoin’s price to reach $100,000 by December 2021.

Earlier today, popular crypto analyst Josh Rager had this to say about Bitcoin’s latest price action and the Fed’s continued money printing:

$BTC – Nice weekly close above $9550s

Looking forward to watching the FED pumping all markets this week pic.twitter.com/AzRm78Rzyy

— Josh Rager 📈 (@Josh_Rager) May 18, 2020

And here is how another popular crypto analyst expressed the current market sentiment and how smart crypto traders are playing the market:

Being long altbtc pairs here is equivalent to taking a very expensive short BTC vol position.

Think it likely that if BTC breaks $10K, alts bleed, and if BTC breaks down, alts crash harder. Only positive scenario is BTC ranging, which seems less and less likely.

— light (@LightCrypto) May 18, 2020

Would consider this a tell on how smart speculative money is positioning.

Longs on futures are playing a break over $10K and swap funding moving to a positive structure while futures contango expands.

They are bidding now while basis is cheap in the event they are right. https://t.co/zphuihVpRd

— light (@LightCrypto) May 18, 2020

I am yet to run into a single competent trader/investor who is bearish on Bitcoin in this current moment. And those who are long are bullish with conviction.

In hindsight it’ll either look incredibly obvious, or it’ll turn out that we’ve all run grossly ahead of ourselves.

— light (@LightCrypto) May 18, 2020