Federal Reserve Balance Sheet Rockets to New High, Boosting Bitcoin Bull Case

Data released by the Federal Reserve on Thursday has shown a new all-time high in the central bank's balance sheet. The U.S. monetary authority now holds $7.177 trillion worth of assets—from exchange-traded funds and Treasuries to mortgage-backed securities and credit facilities. 

$7.177 trillion is equivalent to approximately one-third of the U.S.' national GDP in 2019. The metric is even more astounding when considering that at the start of the year, the Federal Reserve held only approximately $4 trillion worth of assets.

This comes shortly after Jerome Powell, the Federal Reserve Chairman, asserted that the bank will continue to do what it can to ensure inflation remains around the 2% mark and ample liquidity can reach markets. Powell said in August: 

"This dynamic is a problem because expected inflation feeds directly into the general level of interest rates. Well-anchored inflation expectations are critical for giving the Fed the latitude to support employment when necessary without destabilizing inflation." 

Analysts see the persistent growth of the balance sheet and a commitment to further monetary stimulus if necessary as critical for growth in the price of Bitcoin moving forward.

Raoul Pal, CEO of Real Vision, commented after Powell's aforementioned speech that the Federal Reserve's "ZERO tolerance for deflation" will boost Bitcoin and gold sky-high: 

Most people don't understand the latter but is simply put, Powell has shown that there is ZERO tolerance for deflation so they will do ANYTHING to stop it, and that is good for the two hardest assets - Gold and Bitcoin. Powell WANTS inflation. 

Where Bitcoin comes in: as the Federal Reserve introduces trillions of dollars worth of stimulus into the economy that previously weren't there, the U.S. dollar is devalued. We've seen this over the past few months with assets like equities reaching all-time highs, solely because there are more dollars circulating in the system.

Bitcoin has the opportunity to benefit greatly from this due to its fixed supply of 21 million coins.