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Bitcoin is a cure to deflationary death spiral in the current market scenario claims Mark Yusko

Biraajmaan Tamuly



Bitcoin is a cure to deflationary death spiral in the current market scenario claims Mark Yusko
Source: Unsplash

According to many experts, the US economy could suffer another crack with the market indicators suggesting a potential recession at bay. Despite Federal Reserve Chairman, Jerome Powell asserting that US economy was in “a good place”, developments suggest the contrary. The most prominent ones being incessant trade and currency war with China, President Donald Trump, and the Feds at loggerheads with the former crying for the central bank to lower interest rates to zero or lesser.

Mark Yusko, Founder, CEO and Chief Investment Officer of Morgan Creek Capital Management in the latest edition of ‘Keiser Report: Make Recessions Great Again’, stated

“one of the things that should occur in an environment where the dollar weakens, right, that the dollar should weaken if they’re creating more of them that should actually be good for real assets, but we are seeing the exact opposite.”

Yusko agreed to host, Max Keiser’s statement that the idea of printing money was not fighting deflation but causing one and added that this was something that occurred when money is created out of thin air. This statement was made as a weakening theUS Dollar continued to make headlines. Despite the turmoil in the market, Bitcoin and Gold exhibited a positive correlation; and exhibited a declining mode, at a time when it was expected to swing higher.

The demand for a safe-haven generally rises during market turmoil. The present scenario, which Yusko termed as a “deflationary death spiral”, could position Bitcoin as a quintessential safe-haven instrument even when the cryptocurrency was in a tepid state. Yusko further stated that Bitcoin is the cure to all of this. According to the American Investor, there is a “weakening across the board” of the real tangible assets, like gold, oil, commodities, and Bitcoin.

Biraajmaan is a full-time journalist at AMBCrypto covering the US market. A graduate in Automobile engineering, he writes mainly about regulations and its impact with a focus on technological advancements in the crypto space.

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    October 8, 2019 at 8:49 pm

    Inflation by definition is the increase in the money supply. Therefore, printing more money is inflation.

    Bitcoin is a deflationary currency because once all bitcoins have been created, there are no additional bitcoins created ever after that. The more people use bitcoin therefore, the lower prices go.

    To illustrate, let us suppose that there are only one million bitcoins in the entire world. If all those bitcoins get divided between 1000 people who use them exclusively as their currency, each person has 1000 bitcoins. In a bitcoin only world, those 1000 bitcoins would have to buy houses, groceries, cars and everything else – so the value of the bitcoins would rise to allow people to make those types of purchases.

    Now imagine that all of a sudden one million people now pile into bitcoin. Let us suppose that we divide them equally so that now each person has only 1 bitcoin each, this forces prices to go down by 1000 times – making each bitcoin 1000 times more valuable – that is deflation.

    If a billion people pile in there is still only 1 million bitcoins because no more can be created – so now prices have to go down by 1 million times the original value for everyone to be able to use them. Bitcoin is therefore deflationary – causing prices to go down the more people pile into it. The people who saved their bitcoins instead of spending them make a killing – everyone else is screwed.

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