The US Federal Reserve has announced a major change in policy to boost inflation. Bitcoin will benefit greatly from this policy change. Not only could the price of Bitcoin rise above $ 500,000, but a number of companies have started shifting their reserves into cryptocurrency to hedge against higher inflation.

Fed officially ready to boost inflation

The Federal Open Market Committee announced major changes to its policy strategy on Thursday. The announcement coincides with Fed Chairman Jerome Powell's speech at a virtual meeting of the annual Jackson Hole business symposium.

All 17 Fed officials agreed to an “average inflation target” policy that allows inflation to remain “moderately above 2%” for a period of time. This means the Fed will be less inclined to hike rates when the unemployment rate falls, CNBC noted. Powell said:

Many find it counterintuitive that the Fed wants to boost inflation. However, persistent under-inflation can pose serious risks to the economy.

While the Fed chair did not make it clear what "moderately above 2%" means, Robert Kaplan, president of the Dallas Fed, said Thursday that it means inflation in the range of 2.25% to 2.5% annualized.

The market was expecting Powell's speech on the Fed's higher inflation policy. "When the bill is due, there are two ways out," said Jill Carlson, co-founder of the Open Money Initiative, adding that the first is to "hurt the poor with inflation" and the second is to "hurt the rich with taxes." Carlson added, "The Fed has just made Option A official policy."

Bitcoiners see the Fed's announcement as bullish. After Powell's speech, some people used social media to remind others of the benefits of Bitcoin. Mimesis Capital Louis Liu wrote, "Powell is a friend of Bitcoin" while many others stepped in just to say "Buy Bitcoin". Abra CEO Bill Barhydt commented, "Bitcoin doesn't need the Fed to be successful, but if they insist on throwing gasoline on the fire, so be it."

"The Fed, led by Jerome Powell, continues to be Bitcoin's biggest booster," wrote Tyler Winklevoss, co-founder of Gemini Exchange. On Thursday he advocated a bitcoin worth $ 500,000 as "ultimately the only long-term protection against inflation". He explained that the price of the cryptocurrency could increase 45 times its current price, which means it could hit $ 500,000 per coin or even more. The price for BTC is $ 11,453 at the time of writing.

Some companies have already switched their reserves to Bitcoin to hedge against higher inflation. Microstrategy, listed on the Nasdaq, recently announced that it had converted reserves worth $ 250 million into Bitcoin for this purpose. The company stated that it has "observed particular characteristics of Bitcoin that led it to believe that investing in the cryptocurrency not only offers adequate protection against inflation, but also the prospect of higher returns than other investments." According to Microstrategy, the Canadian restaurant chain Tahini converted all cash reserves into Bitcoin, while the software company Snappa converted 40% of its cash reserves into cryptocurrency.

What do you think of the Fed's new inflation policy? Let us know in the comments below.