Crypto “Renaissance” Possible if Central Bank’s Trust is Lost: Stanley Druckenmiller

Billionaire investor Stanley Druckenmiller believes that cryptocurrency might resurface as people start to doubt their central banks. The hedge fund manager believes that this conclusion is becoming more likely given the situation of the global economy and the Fed’s uphill struggle against both inflation and recession.

The Duquesne Family Office CEO started his interview at the CNBC Delivering Alpha Conference on Wednesday by decrying the Federal Reserve’s “radical monetary policy” in 2021. “I was just incredibly frustrated with what to me looked like a Fed that was just taking unbelievable risks,” he said.

He continued, saying that the Fed’s activities contributed to the deflation of the “wildest raging asset bubble ever seen,” stressing that such bubbles typically lead to economic crashes. The Fed chose not to handle such asset inflation at the time because it was “not part of their mandate.”

Bitcoin surged in 2020 and 2021, but since the Fed started tightening monetary policy this year to combat inflation, it has plummeted back to late 2020 lows. The annual CPI reached a high of 9.1% in June but has since declined to 8.3% in August. The benchmark interest rate set by the central bank is currently a little over 3%.

While Druckenmiller is happy that the Fed is now actively tackling inflation, he doesn’t think they’ll be able to avoid starting a recession by the end of 2023. As a result, he doubts the Fed’s ability to reduce inflation without changing direction. In August, Fed Chairman Jerome Powell stated that lowering inflation “is likely to require a sustained period of below trend growth.”

As the Fed continues to tighten, Druckenmiller clarified that he is avoiding assets, including Bitcoin and other cryptocurrencies. However, he believes there will be a long-term case for cryptocurrency to increase if central banks change their positions, much as the Bank of England did on Wednesday.

Similar to gold, Bitcoin has a consistently low supply, leading many people to see it as a long-term inflation hedging asset. Even Paul Tudor Jones has said that Bitcoin is better than gold and that the possibility of it replacing all other forms of money may put central banks in danger.

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