Druckenmiller sees ‘big role’ for cryptocurrency as central bank trust evaporates Samuel Wan · 5 hours ago · 2 min read
The Bank of England pivoted on quantitative tightening by bailing out U.K. pension schemes, further kicking the can down the road.
Cover art/illustration via CryptoSlate
Famed investor Stanley Druckenmiller said cryptocurrency could have a “big role” as people seek alternatives to fiat money.
The comments came in a CNBC interview with host Joe Kernen in which the pair discussed the macro landscape, notably the Bank of England’s (BoE) sudden flip to quantitative easing.
Bank of England under fire
On September 23, U.K. Chancellor Kwasi Kwarteng delivered a package of tax cuts designed to jump-start a floundering economy.
The package included cuts to income tax, stamp duty (property purchase tax,) and scrapping planned business rate increases. Kwarteng said the “mini budget” would improve the U.K.’s competitiveness and incentivize employment and business investment.
The Treasury confirmed that government borrowing would increase by an additional £72 billion ($78.08 billion) to fund the tax cuts.
On September 28, to avert a collapse in U.K. government bond prices, the BoE was forced to buy £65 billion ($70.6 billion) of these bonds. The move was driven by a liquidity crisis in Liability Driven Investment funds owned by pension schemes. Without the intervention, these funds would have become insolvent.
However, critics warned that taxpayers would become saddled with the cost of bailing out the pension schemes. Moreover, critics further argue that the intervention was a 180 from monetary policy meant to reign in spiking inflation.
@BTC_Archive alluded to the BoE having no choice but to intervene, adding that other central banks will soon be forced to enact similar measures.
Central Banks: No pivot. No pivot. No pivot
– Bank of Japan starts buying bonds
– Bank of England starts buying bonds.
Who is next?
US Fed, ECB?
— Bitcoin Archive 🗄🚀🌔 (@BTC_Archive) September 28, 2022
Cryptocurrency gaining favor as a viable alternative
U-turning on quantitative tightening suggests the BoE cannot undo years of money printing and low rates without a crash landing. Wednesday’s intervention has only kicked the can down the road.
Druckenmiller suggested that the general public is losing faith in the banking system. With that, he sees cryptocurrency as part of transitioning to a better plan.
“I could see crypto currency having a big role in a Renaissance because people just aren’t going to trust the central banks.”
Druckenmiller told Kernen that he doesn’t own any cryptocurrency, especially not during a quantitative tightening environment.
The U.S. central bank has so far stuck firm to its hawkish stance. Druckenmiller conceded that further pain will likely result, but he” just hope[s] they stick to their guns.”