US money velocity crash in Q2 boosts $288K Bitcoin prediction: analyst
There is “too much money to spend,” and this will help Bitcoin (BTC) reach its next phase of huge price increases, analysts believe.
In a blog post on Aug. 25, Jeroen Blokland, portfolio manager at asset manager Robeco, noted that U.S. M2 money velocity had hit historic lows.
“Too much money to spend”
Velocity measures the speed at which money moves around the economy, and 2020 has seen a crash in the metric.
“Theoretically, the velocity of money rises when economic activity increases,” Blokland wrote.
“While the sudden economic stop obviously resulted in much lower economic activity, the sharp decline also suggests there is just too much money to spend. A quick look at central bank balance sheets confirms this.”
The huge money printing activities by the Federal Reserve alone have characterized the period since March, when coronavirus sparked a cross-asset market crash.
U.S. money velocity chart. Source: Robeco
The Fed’s vicious circle: more inflation, more money
As Cointelegraph reported, rising central bank balance sheets in G4 nations have come in tandem with rises in safe haven assets — Bitcoin, gold and silver.
For PlanB, the quant analyst behind Bitcoin’s stock-to-flow price forecasting models, the collapse in money velocity will only serve to speed the largest cryptocurrency on its way to recent predictions — an average of $288,000 by 2024.