Changpeng Zhao is one of the most influential people in cryptocurrency. He leads Binance, which launched in 2017 and quickly became the biggest cryptocurrency firm in the world, and he has a knack for spotting trends well before others. That’s why it’s worth hearing what he has to say about inflation.
In a recent interview with Fortune, the Chinese-Canadian Zhao, known to most people as CZ, shared his thoughts on current macroeconomic trends. His biggest concern is the recent bout of quantitative easing (QE)—a fancy way to describe printing money—by the Federal Reserve and other central banks.
“Given the amount of QE, we will see hyperinflation,” says Zhao. “We’ve seen a record recovery in stock markets, which are at an all-time high. It doesn’t make a lot of sense. It only makes sense when you print a lot of money and give it to Wall Street.”
Hyperinflation is defined as prices rising by 50% or more in a month—a phenomenon that seems inconceivable in the U.S., where inflation has been barely above zero in recent years. But hyperinflation has occurred elsewhere in modern times, notably in Zimbabwe, Hungary, and the former Yugoslavia—and the cause has typically been the excessive printing of money.
In the case of the Fed, its recent QE efforts came as an emergency response to the economic crisis triggered by the pandemic, and many believe the central bank had no choice. But the scale of the intervention is staggering—one projection has the Fed conjuring $3.5 trillion in new money by the end of this year.
So far, there is little evidence of widespread inflation, but Zhao believes it’s a matter of time. He points out that food prices are rising already and says the effects of QE are only beginning to be seen.
Zhao also argues that stock prices are a poor metric by which to judge the effects of QE.
“The question is not what stocks are worth against the U.S. dollar but what stocks are worth versus house prices and food,” he says.
Zhao describes hyperinflation as “the next big problem” for countries around the world. He points out that if central banks in large economies like the U.S. are printing money at scale, it would be “foolish” for smaller countries not to do the same. The upshot, he suggests, will be a broad-based devaluing of fiat currencies.
In light of all this—and not mention his role as CEO of a cryptocurrency company—it’s no surprise Zhao is an advocate for buying Bitcoin.
“Anything with a limited supply will go up,” he says, referring to the fact that Bitcoin has a finite supply of 21 million, most of which are already in circulation.
While this notion of Bitcoin as a store of value akin to gold is popular among cryptocurrency fans—who have helped popularize the recent “Fed go brrr” meme—there is little evidence that the thesis is correct.
During the market meltdown in March, Bitcoin lost more than half its value—tanking even further than most stocks—which did little to boost the idea that it’s a safe haven in times of market trouble. While Bitcoin prices have since recovered and outperformed the broader equity market, it’s hardly a slam dunk to make the case that cryptocurrencies are a hedge against inflation.
Zhao, though, believes the case for cryptocurrencies will become stronger once the inflationary effects of QE become clearer.
The Binance CEO also cites other broader economic trends he believes will foster market instability, including the choppy trade relationship between China and the U.S.
“There are strong-minded leaders in both countries. China wants to be the dominant nation in the world and for the renminbi to be the dominant currency,” he says. “But we can’t uncouple countries from one another without detrimental effects to the global economy.”
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