Bitcoin and Ethereum: Correlation to traditional market is normal
The European Central Bank is moving further and further away from its roots: now the ECB President, Christine Lagarde, announced on Wednesday that she would be reconsidering the inflation target. For German savers such a change would have serious consequences – for Bitcoin Lifestyle it remains a driver.
„We need to thoroughly analyze the forces driving the inflation dynamics today and consider whether and how we should adjust our strategy in response,“ announced ECB President Christine Lagarde at a conference in Frankfurt on Wednesday. „We should have an inflation target that is credible and that the public can easily understand.
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Following the US Federal Reserve, the European Central Bank is now also shaking up the inflation target as a „crisis-preventing“ agent. With this argument, the ECB could pump even more cheap money into the markets and, despite rising inflation, keep the key interest rate at zero or even lower it further. Such a move goes against the Treaty on the Functioning of the European Union, which was concluded in 2003 and which sets the ECB’s primary objective of ensuring price stability. A central bank that deviates significantly from its primary objective could lose credibility. Is Bitcoin now the tip of the iceberg?
Pigeons against hawks
Below, but close to two percent. This is the current inflation target of the ECB to ensure price stability. This year, the European currency guardians will probably miss this target for the eighth time in a row. Since 2013 the annual inflation rate has been well below the „below but close to two percent“. With the 64-year-old Lagarde, there will now be some changes in the Eurozone. It will let inflation off the leash. Lagarde followed as a monetary policy „dove“ the Italian central banker Mario Draghi, who was also not averse to a loose monetary policy. The „doves“ are considered advocates of a loose and expansive monetary policy. They offer flagrant resistance to the hawks, who stand for a restrictive monetary policy and see fighting inflation as one of their main tasks. So all the signs are that the money party at the top will continue for the time being and that the hawks are likely to go through hard times. But while the peregrine falcon hunts the pigeons, the splitting of the camps helps above all Bitcoin, Ethereum and Ripple to the liquidity wave.
Emergency exit: Bitcoin
In particular, the global expansion of expansive monetary policy and efforts by governments worldwide to offset recessionary tendencies with government spending provided fuel in the crypto world. For example, the mixture of escalating government debt ratios – i.e. the percentage ratio of a country’s debt to gross domestic product – and increasing price pressure had apparently led investors to increasingly look for opportunities to invest outside the traditional system of the euro, US dollar and other national currencies. In the fight against inflation and the devaluation of fiat currencies, many investors now see Bitcoin or gold as a safe haven. After the initial corona shock, both assets quickly rebounded.
Listed companies park reserves in Bitcoin
But in the meantime there are also large companies besides private investors who want to put their assets in security. For example, MicroStrategy and Snappa caused a stir when they announced that they would park the majority of their reserves in Bitcoin. In the financial sector or when making investment decisions, probabilities are the most important factor. Of course, it is not least since John Maynard Keynes‘ macroeconomic theory, that ignorance about the future has always prevailed. No one can really say for sure when inflation will come and how strong it will be. However, it can certainly be said that the risk of inflation is based on the economic policy