Throughout 2020, we saw the rise of digital assets and the U.S dollar’s gradual decline. The U.S. government’s economic choices, the printing of trillions of dollars, and the beginning of mainstream adoption of crypto have led to this trend. In this blog, we dive into why the value of the U.S. dollar is subsiding and why more people are investing in Bitcoin and migrating to digital assets.
Why is the U.S. Dollar Weakening?
Since the beginning of the pandemic, the U.S. dollar has steadily declined due to the printing of the dollar to stimulate the economy and qualitative easing to keep the economy afloat.
Did you know that over 25% of all dollars in circulation were printed since the start of the pandemic?
The U.S. government has deemed these steps necessary to help U.S citizens stay afloat due to the economic shutdown. However, this has ultimately been detrimental to the power of the U.S. dollar, especially in relation to its purchasing power. Things become more expensive due to inflation, and each dollar you own becomes worth less.
The stimulus packages put in place have been necessary to prevent economic collapse. These packages encompass industry bailouts, supplemental unemployment benefits, tax incentives, and direct subsidies that are meant to stimulate economic growth. In tandem, these factors have contributed to a falling U.S. dollar. This is because simultaneously printing more money and spending financed debt contribute to a growing budget deficit and put more pressure on rising inflation. And it’s expected that many more stimulus packages are to come.
The U.S. Federal Reserve has made it clear, as recently as Wednesday, January 27th, 2021, that it has no intentions to raise interest rates, which have been near zero since March 2020. The Fed has two primary goals, fostering maximum employment and price stability. As long as it falls short of those goals, it will attempt to keep credit affordable. By keeping interest rates near zero, officials hope they can boost demand in the economy and aid job market recovery.
Additionally, the Fed is buying approximately $120 billion in government-backed bonds each month to help the economy. Many expected these buybacks to slow, but the Fed chair, Jerome H. Powell, has made it evident that officials are not closer to a date when they reduce these purchases (NY Times).
All of these factors have led to the dollar falling to other foreign currencies as the U.S. relies on “foreign capital to compensate for its shortfall of domestic saving” (Mint).
So, Why is Bitcoin Rising?
Bitcoin had a strong close to 2020, hitting double its 2017 all-time high and reaching over $40,000. As Bitcoin hit its two year all-time high, it entered into price discovery, signifying strength and demand for the digital asset. Throughout 2020, Bitcoin became progressively stronger as mass adoption of crypto loomed on the horizon. Additionally, investors have been looking for alternative places to put their money since the pandemic’s economic effects have been so detrimental, and the stock market feels out of sync with the current economic climate.
Several companies added Bitcoin to their balance sheet in 2020, helping pave the road to adoption. MicroStrategy announced that it would purchase $175 million more Bitcoin, upping holdings to $425 million in Bitcoin that they plan to hold for a century (Coindesk). Additionally, Twitter CEO Jack Dorsey announced that Square was adding $50 million in Bitcoin to their balance sheet (Forbes). It is now believed that institutions hold around 5.5% of all the Bitcoin in circulation, and “Bitcoin Treasuries found that 28 publicly traded companies, private companies, and mixed funds hold at least $1 million worth of Bitcoin” (InvestorPlace).
Bitcoin is also rising in value because of its scarcity. Bitcoin’s 21 million supply cap and its intrinsic volatility are what make the asset so scarce. While the limited supply is a crucial factor for Bitcoin’s demand, it is not the most important. “Bitcoin can’t increase or reduce its rate of production to compensate for changes in demand for bitcoins. And in a well-functioning market, when supply can’t respond to demand, the price must adjust, (Coindesk)." Thus Bitcoin is inflexible, and that is what makes the asset so volatile. This means that Bitcoin’s supply will always remain fixed, but its price will always be subject to change. All of this adds up to the sky being the limit for the price of Bitcoin, making it a very attractive investment for investors.
Lastly, another large factor adding to the rise of Bitcoin is the concept of truly taking control of your financial future. With the world’s uncertainty, many retail customers have turned to digital and mobile platforms to invest their hard-earned money into digital assets. Having control over their funds has given many customers a chance to grow their wealth and have some peace of mind as they can choose to buy or sell their positions as the market continually moves 24/7. Retail investment is becoming increasingly popular, and Bitcoin continues to exhibit exponential growth, thus helping the demand for Bitcoin continue.
How to Buy Bitcoin on the Voyager App
1. Get the Voyager App: Now available in Apple iTunes Store and Google Play Store, visit the store and search Voyager or click here to download now.
2. Open a Voyager Trading Account: Fill in your personal information to create a trading account. As a licensed financial institution, we're required to collect this information to protect our users, but know that your personal information is always safe with us.
3. Link your Bank: Link your bank account by navigating to the User Icon on your Market Screen. On your account page, tap "Bank Accounts" and add your bank.
4. Fund your Voyager Account: To deposit USD, go to your account page and tap "Transfer Cash or Crypto" & tap "Deposit to Voyager Account" and select USD. Then enter the amount of USD you'd like to transfer and slide the "Slide to Deposit USD" banner. Now you can trade instantly.
5. Buy BTC: Navigate to the Market Screen scroll until you reach "BTC" and tap to access the Bitcoin page, then tap "Buy BTC." Insert the amount of USD you'd like to spend and slide the "Slide to Buy BTC" purple banner to complete your purchase.
Trading on the Voyager app is currently available to all U.S. residents (excluding New York state). We are actively working with regulators to expand to New York and internationally in the future.