Why Bitcoin Is The Solution To The “Powell Problem”

Legendary investor Stanley Druckenmiller gave an interview to CNBC’s Squawk Box strengthening the theory of Bitcoin as a store of value. Druckenmiller talked about the possibility of the U.S. dollar losing its status as a reserve asset and the rise of BTC and cryptocurrencies to solve a problem accelerated by the current economic crisis and the Covid-19 pandemic.

The hedge fund manager believes that the U.S. Federal Reserve is enabling a “massive expansion” in fiscal policy and an increase in debt. In the next 15 years, the U.S. could no longer be held as a reserve currency because of this policy.

Druckenmiller has a “problem” with the FED planning to extend its Quantitative Ease, a policy implemented by the central bank to purchase financial assets to inject capital into the markets, up to $2.5 trillion after “vaccine confirmation”.

However, the hedge fund manager believes that the U.S. economy is accelerating, with retail sales about trend and jobs recovering in this country. Out of the potential “black hole” that could have been the Covid-19 pandemic, there seems to be little point for these measures, according to Druckenmiller. Bitcoin and a crypto-based ledger system could be a solution:

5-6 years ago I said Crypto was the solution in search of a problem. That’s why I didn’t play crypto the first wave because we already have the dollar, why do we need crypto for? The problem has been clearly identified. It is Jerome Powell and the rest of the world’s central bankers. There is a lack of trust.

A reserve currency must meet certain criteria and Druckenmiller believes there isn’t an alternative in fiat currencies. The Euro is a “disaster” and “who is gonna trust the Chinese”, the hedge fund manager added. Therefore, he believes crypto can be the only solution.

Bitcoin To Remain As The King Of Store Of Value

About the “raging mania in all assets”, such as GameStop and Dogecoin, Druckenmiller compared the current situation to the 90s and said it is uncertain when this phenomenon will come to a stop. He revealed to still have long positions in the stocks market, but not “nearly long” as 5 months ago. The hedge fund manager added:

We are still long the stock market. We’re not as nearly as long as we were 4-5 months ago…I will be surprised if we are not out of the stock market by the end of the year.

Later, he claimed to be a “dinosaur” but predicted that Bitcoin will maintain its status as a store of value assets due to the time it has “been around”, its 14-year-old brand, and finite supply. However, he said that Ethereum has an advantage when it comes to smart contracts, commerce, and others. Druckenmiller compared these two cryptocurrencies with the early days of the internet, social media, and search engines:

Yahoo invented the search engine … We all know what happened with Google versus Yahoo. It’s just not probable in my mind that Ethereum is going to be the ultimate winner.

Bitcoin trades at $56,048 with a 3.2% loss in the daily chart. In the weekly and monthly chart, BTC has a 1.9% and a 6.5% loss, respectively.