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Throughout the middle of March, many Americans received stimulus checks from the government, and while the payments — $1,400 for every U.S. citizen earning less than $80,000 annually — will be a blessing for millions in desperate economic straits as a result of the COVID-19 crisis, it has raised again the specter of inflation. And as with many other things, this too has a Bitcoin (BTC) angle.

On March 15, Galaxy Digital CEO Mike Novogratz proposed on NBC’s Squawk Box a new role for Bitcoin in light of recent stimulus measures — as “a report card for how citizens think the government is doing managing their finances.” If people believe that U.S. Treasury Secretary Janet Yellen et. al. can safely land this “giant supertanker” that is fiscal and monetary stimulus, said Novogratz, then “people will stop moving into Bitcoin.” But for now, “we’re in uncharted territories in how much money we’re printing, and Bitcoin is a report card on that.”

Podcaster Preston Pysh urged something similar a few days earlier in response to the news that the U.S. House of Representatives had passed the $1.9-trillion COVID relief package: “Think of #Bitcoin like a manipulation gauge.”

What is one to make of this? A new and exciting use case for the world’s first cryptocurrency — i.e., as a sort of a feedback tool for monetary policymakers? Or just another fantasy of Bitcoin maximalists?

“No evidence” that Bitcoin is a hedge

David Yermack, a professor of finance at New York University’s Leonard N. Stern School of Business, rejected the notion that BTC could serve as a “report card” for governments, telling Cointelegraph: “There’s no evidence that Bitcoin provides a hedge against movements in sovereign currency.” He added that “when one looks at large samples for research purposes, evidence has been very hard to find in a statistically rigorous sense.”

Bitcoin is much too imprecise of a measure, others say. If inflation rises 2.4% over the course of the year, as the Federal Reserve recently forecast, will BTC’s price also rise 2.4% — or some constant multiple thereof? Or conversely, if the Fed tightens up the money supply, tamping down inflation, will BTC’s price also fall in step? BTC basically has to be highly correlated with the inflation rate to be useful as a feedback tool, and that seems unlikely.

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