The United States has entered the era of helicopter money, and the era of Bitcoin is coming soon. Don’t miss it

Bitcoin is facing its first big test — whether it can serve as a store of value amid a broader market crash, according to some.

Image source: Pixabay

From this perspective, Bitcoin has failed. In the face of the chaos caused by the coronavirus, the price of Bitcoin has plummeted, losing about half its value as traditional markets recorded historic declines.

But this is not make or break for Bitcoin as a whole: Bitcoin’s success is not judged by Bitcoin’s price, but by its digital scarcity in a period of helicopter money, quantitative easing (QE), and record-low interest rates.

Earlier this week, the Federal Reserve slashed interest rates to zero and unleashed $1 trillion in stimulus to protect the world's largest economy from massive shutdowns caused by the coronavirus.

The move followed similar rate cuts around the world as governments and central banks scrambled to pump money to secure markets. The hasty move largely failed, with the Dow suffering its worst day since the Black Monday market crash in 1987 and its third-worst day ever.

Today, U.S. Treasury Secretary Steven Mnuchin said he is ready to mail checks to millions of Americans to offset the economic burden of the coronavirus pandemic. This unconventional economic stimulus measure has recently been popularized by some left-leaning economists as universal basic income (UBI), but was once known as helicopter money: newly printed cash would literally drop from the sky into the pockets of the public (a concept that some cryptocurrency investors will be familiar with).

"We are looking at sending checks to Americans immediately," Mnuchin said at a White House press briefing. "Americans need cash now, and the president wants cash now - I mean within the next two weeks."

Elsewhere, Spain is apparently weighing a similar helicopter money-style stimulus that could wreak havoc on the economically integrated eurozone.

Many traditional economists don't like helicopter money. They say it's harder to remove from the system and could cause inflation to spike over the long term.

Central banks around the world have been forced to consider such extreme options because of the lingering effects of the 2008 global financial crisis, even though many of their less radical policy tools remain effective.

"The US will soon become addicted to this helicopter money," Anthony Pompliano, co-founder of hedge fund Morgan Creek Digital, said on Twitter.

Meanwhile, some market watchers worry that a broad sell-off combined with helicopter money proposals could lead to a glut of cash.

“What we’re seeing in the market right now is an unprecedented shift toward cash,” said Marty Greenspan, founder of financial advisory firm Quantum Economics.

“Everybody is reckoning with everything. Once the dust settles and we start to see what the end of the coronavirus crisis looks like, people are going to be on edge.”

The latest monetary offering from the Federal Reserve, a special fund to keep credit flowing through the U.S. economy during the coronavirus panic, has investors happy with the situation today.

The Dow, S&P 500 and Nasdaq were all up around 5% by the close. The news did little to shake up bitcoin, which has been hovering around $5,000 since its big move lower over the weekend.

“Bitcoin was built for these crisis events,” said Keld van Schreven, co-founder and managing director of blockchain investment firm KR1.

“Bitcoin, Ethereum and other crypto networks do not need bailouts or QE. They only need a handful of servers to run, validate and complete transactions. Bitcoin, Ethereum and other crypto networks have already taken out the weakest link (that’s us). They are stronger.”

Regardless of the price of Bitcoin, central banks or governments cannot artificially increase its price - only increased demand can support a price increase.

We also cannot print or paste Bitcoin from a clipboard. Regardless of its extreme price fluctuations, Bitcoin remains certain in times of uncertainty.