Now may be one of the best times to buy Bitcoin

Ever since the Great Financial Crisis of 2008 and 2009, major central banks have taken an incredibly accommodative stance on monetary policy to boost the economy, a strategy exacerbated by the coronavirus pandemic. Although it was not a problem in the past, today we are experiencing rising prices across the entire American economy as a direct result of money printing.

And now, to dampen the hovering inflation for everything from groceries and gas to rent and used cars, interest rates are ticking up. But the Federal Reserve’s recent hawkish stance could turn dovish in the not-too-distant future, and this would be an extremely bullish situation for one asset in particular — Bitcoin (BTC 0.46%).

Crypto winter

To be clear, as long as the central bank continues to raise interest rates to curb inflation that is at 40-year highs, I see Bitcoin remaining under pressure. This is because in this environment investors lean towards safer assets, such as Government bonds and even cash instead of more speculative financial instruments such as growth technology stocks or cryptocurrencies. It helps to explain why Nasdaq Compositea tech-heavy stock index, has lost 17% in 2022, roughly double that S&P 500‘s drop (at the time of writing).

An extended period of weak crypto prices is known as a crypto winter. During this time, money typically flows out of the room as investor interest wanes. Like bubbles bursting in traditional financial markets, this is when flawed, fraudulent and unsustainable projects and companies are shaken out, and the strongest teams and enterprises will survive. Specifically in the crypto space, developer activity should continue to remain strong regardless of what prices do.

Consequently, for someone who has money on the sidelines that they are ready to put to work, buy Bitcoin, which has fallen 65% from its all-time high last November and is in a major bear market, could be a good financial decision right now. That’s because not only is the long-term potential absolutely huge, but over the next 12 months or so we could see a more accommodative monetary policy.

Reversing course

The Federal Reserve’s intended goal is to slow inflation without bringing the economy down into a recession, with what is known as a “soft landing.” But some investors do not believe that this is a realistic scenario. The US economy has contracted for two consecutive quarters, which technically means we are already in a recession. The Biden administration, on the other hand, has issued a statement saying that the United States is not in a recession, but I think this was done to keep the public from panicking.

Central bankers point to the strong labor market and 3.5% unemployment, but this may be misleading. According to a survey by small business insurance marketplace Insuranks, 44% of Americans have taken on side hustles to make extra money. And more Americans today hold two full-time jobs than in February 2020, before the pandemic hit the economy. In addition, consumer confidence is at a record low.

What this means is that as the Federal Reserve continues to set higher interest rates to stop inflation, it will inevitably lead to a full-blown recession that would not be discussed. And at this point the central bank will probably have to change course and start cutting interest rates again because they will need to stimulate economic growth. As a result, liquidity will again be pumped into the financial system to encourage lending by banks and borrowing and consumption by consumers.

And when this happens, the investment case for owning Bitcoin will become strikingly clear. Governments around the world need to keep the money printer going, and keep interest rates low, to support their colossal debt burdens, in turn creating an environment for hyperinflation to return. If only there was a small digital store of value that was absolutely finite without any central bank controlling it. Fortunately, there is. It’s called Bitcoin.