This could also have an impact on the price of BTC.
Yesterday Anthony Pompliano shared a Zero Hedge tweet showing a Bloomberg screenshot showing how the Fed now owns 22,913 different stocks. This would make the American central bank the largest investor in the world.
„The Federal Reserve is officially the largest investor in the world.
Think about it for a second“.
In fact, the role of the central bank is certainly not to invest in the financial markets. Despite this, it has become the largest investor in the world on the financial markets themselves, and in particular on the stock market, which is certainly not a risk-free market.
The fact is that, since the beginning of the pandemic, the Fed has started creating large amounts of dollars out of nothing, and distributing them on the markets, for example by using them to buy shares.
The attempt was to avoid price collapses, due to an economic situation as serious as unexpected, but as an unintended consequence has in fact turned the Fed into a major investor. In other words, the American central bank is now the world’s largest whale on the financial markets.
Fortunately, it is difficult to imagine that the Fed can offer for sale in the short term what it has purchased, also because in fact it did not have to incur any direct costs to make these purchases.
Selling the securities it now has in its portfolio to collect dollars would be tantamount to taking dollars out of the financial markets, and this is a hypothesis that seems likely only in the event of excess liquidity.
This does not detract from the fact that the liquidity in circulation on the financial markets is now high, since to buy all those securities the Fed had to pay them in dollars created out of nothing.
Will this liquidity also stimulate the growth of the bitcoin price, or the crypto market in general?
In fact, since the collapse of the financial markets in mid-March, the total capitalization of cryptocurrency has risen from 140 to 370 billion dollars, more than doubling. It should also be said that, before the collapse, it had reached a peak of 300 billion in February in 2020.
If at the beginning of the year 68% of this capitalization was due to Bitcoin Era, according to CoinMarketCap data, it had already dropped to 60% by mid-February. In the rest of the year it rarely exceeded 65%, while in the last few days it has fallen even below 58%.
Therefore, although the curve of the total capitalization of cryptocurrencies in the course of 2020 followed the same trend as the bitcoin price curve, it seems that some altcoins have benefited more from the enormous liquidity provided by the Fed on the financial markets so far.
It is not clear, however, to what extent this effect can be quantified, although the above trend appears in some ways similar to that of the American stock exchanges, and in particular to that of the Nasdaq.
Therefore it is possible to imagine that, if it had an effect on the Nasdaq, somehow it could have had a similar impact also on the cryptovalues, since the result appears similar, even if not identical.
The fact remains that the Federal Reserve is in fact manipulating the financial markets well beyond its mandate, thanks to a huge and virtually unlimited firepower. For the time being, this new monetary policy seems to have not yet produced any damage, but it is still far too early to judge it.