Will Bitcoin Catch Up? Stock Market Rallies to New Highs as Biden says Inflation Peaked

With rate hikes, a threat to the crypto bull market, inflation hitting a four-decade high but dropping from last month is seen as positive.

On Friday, Bitcoin hit $50,150 in tandem with the stock markets as US inflation reached a nearly four-decade high in November.

But soon after, BTC dropped to $47,000 and on Saturday went even lower. As of writing, BTC/USD is trading above $48k.

This time, Ether was hit much harder, falling to $3,840 but now recovered above $4k. This pushed ETHBTC from the 2021 high of 0.886 to near 0.080 today.

Meanwhile, S&P 500 continued to show strength and hit a new record high. All three major U.S. stock indexes advanced, actually, with the crypto market lagging. This is unlike what we have been seeing this year as Bitcoin’s correlation with stocks continues to increase thanks to its institutionalization.

This is why crypto trader Kaleo remains bullish on crypto and expects Bitcoin to resume its rally just like it did this summer when it lagged equity markets only to catch up later.

“Same sh*t is gonna happen again,” he said.

The record gains were posted by traditional markets due to the inflation reading being in line with the consensus.

The Labor Department said the consumer price index rose 6.8% in November from the same month a year ago, representing the fastest pace since 1982 and the sixth straight month of inflation rising and topping 5%.

The index, which measures what consumers pay for goods and services, reported a 0.8% spike in November after rising 0.9% in October.

President Joe Biden said on Friday that while inflation is a “real problem” primarily driven by severe supply chain problems, he feels it has now peaked.

“I think it’s the peak of the crisis,” Biden told CNN.

“Peak inflation is behind. Inflation topped,” noted trader and economist Alex Kruger. “That’s very bullish. Continued high inflation would trigger the Fed to accelerate the rates hiking process and is the single most important threat to the crypto bull market.”

Amidst this, JPMorgan Chase still advanced the forecast of the Fed’s first interest rate hike from September 2022 to June. The bank also expects the Federal Reserve to accelerate the reduction of asset purchases and end the tapering process by mid-March.

The latest weakness in the market has the participants concerned if the crypto bull market is intact or if it is the beginning of a multi-year bear market that brings immense pain and more than 99% drawdown.

The Crypto Fear and Greed Index also shows sentiments of “extreme fear” with a reading of 16, the same as late July.

But some are still hopeful, given that the stock market is printing green. The year-end weakness could also be investors just locking in profit to fulfill their tax obligations.

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Crypto Expected to “Outperform” if Inflation Persists, BTC and ETH Options OI Trend Upwards To New Highs

Still, froth and sky-high valuations coupled with inflation and the resultant tapering could set the markets up for a “significant correction.”

The total cryptocurrency market cap hasn’t seen $3 trillion since Nov. 15 as Bitcoin continues to struggle around $56,000.

ETH meanwhile has been outperforming Bitcoin, which could be on the back of the possibility of an Ether ETF as Kelly Strategic Management filed for approval this week.

While Ether has been leading, having surged past $4,775 to mark the beginning of December, Bitcoin and ETH volatility have dropped around 5%-10%.

Last week, the market had a knee-jerk reaction to Covid 19 variant Omicron headlines, as well as Federal Reserve Chair Jerome Powell recognizing high inflation and indicating an accelerated taper. But the market soon bounced on reports of Omicron symptoms being mild, and December started on a bullish note.

In the futures market, open interest (OI) on Bitcoin futures contracts, however, has now fallen to $22.5 bln at the mid-October level. Meanwhile, OI on Ether perpetual contracts is still high at $12.55 bln.

In the options market, OI on Bitcoin contracts is showing resilience at $12.35 bln at last month level, while for ETH, it’s near its ATH at $7.61 bln, a sign of positive sentiment for the asset.

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ETH options OI broke the previous highs from May on Dec. 1, and trading volume has also recovered well, too as it crossed $1 billion in daily volume on Nov. 30.

“Options market is heavily discounting calls with risk reversals still skewed to puts in spite of the spot bounce. Could be a decent opportunity to buy some calls if you have a long view into 2022. We’ve now flipped to a topside skew for both BTC and ETH,” said QCP Capital.

While some market participants doubt that the bull market will continue, others are not yet convinced that we have topped as volume has started climbing back.

Some altcoins are enjoying their own bull scenarios. LUNA broke out strong this week, making a new all-time high after 7.2 million LUNA burned this week, likely to be a catalyst for the move. ALGO, meanwhile, is having its much-anticipated conference this week, where it announced new ecosystem funds being set up. LUNA -4.93% Luna Coin / USD LUNAUSD $ 0.01
$0.00-4.93%
Volume 92 Change $0.00 Open $0.01 Circulating 1.71 m Market Cap 13.74 K
10 h Crypto Expected to “Outperform” if Inflation Persists, Bitcoin and Ether Options OI Trend Upwards To New Highs 1 d Terra Stablecoin Supply Surges by $5B In Under A Month, Bitcoin in Macro’s Clutches, SHIB Added to Balance Sheet 2 w Allocate to Cryptocurrencies to “Beat Inflation” And For “Hypergrowth” in Portfolio, says Strategist
ALGO -7.11% Algorand / USD ALGOUSD $ 1.75
-$0.12-7.11%
Volume 480.49 m Change -$0.12 Open $1.75 Circulating 6.29 b Market Cap 11 b
10 h Crypto Expected to “Outperform” if Inflation Persists, Bitcoin and Ether Options OI Trend Upwards To New Highs 1 mon Tether (USDT) Market Cap Surpasses $70 Billion, Majority Issued on Tron Blockchain 1 mon Sports Betting Platform DraftKings to Become Polygon Network Validator & Support Custom NFTs Drops in Marketplace

In addition, the exchange balances of BTC and ETH have been on a decline since April 2021, as per Delphi Digital. While BTC balances on exchanges are currently at a 3-year low, ETH balances are at a 2-year low.

“The rise of DeFi has allowed users to seek yields on their assets rather than keeping them on an exchange.”

Another bullish sentiment is coming from the regulatory front in India, where the government isn’t looking to ban crypto but to regulate it as assets.

“Even if the bill is 30-40% positive, investors — family offices, traditional VC firms — will put more money into India, if something positive comes out,” WazirX’s head of public policy, governance issues, and content, Aritra Sarkhel, told Business Insider.

But on the flip side, the crypto market has been on an uptrend ever since March 2020 sell-off, and froth is around its peak, with valuations sky-high. Coupled with this, tapering and the subsequent increase in interest rate could make investors risk-off.

“Incredible valuations in both traditional and crypto markets coupled with inflation levels that haven’t been seen in decades could be setting macro markets up for a significant correction,” said QCP capital, sharing the views of trading legend and Bitcoin investor Paul Tudor Jones.

“Taking profits on deep in-the-money positions is a logical step to take. With that said, he expects crypto to outperform if the global economy faces persistent inflation.”

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Allocate to Crypto to “Beat Inflation” and for “Hypergrowth” in Portfolio, says Strategist

Allocate to Cryptocurrencies to “Beat Inflation” And For “Hypergrowth” in Portfolio, says Strategist

Meanwhile, the traditional safe haven asset gold is down 1.82% YTD after hitting new ATH last year, which was also just an 8% increase from the 2011 peak.

Investors should be looking at cryptocurrencies in the new year with high inflation and more modest stock gains looking ahead, said Anastasia Amoroso, chief investment strategist at iCapital Network.

“The 60/40 portfolio is just not going to be enough to beat inflation and deliver returns,” Amoroso said on Bloomberg.

“The thing you might want to do is peel a little bit from the 60 and allocate to something like cryptocurrencies, because if the portfolio has a chance of beating inflation, you have to have hypergrowth in the portfolio.”

Amoroso noted the significant rise in cryptocurrencies this year, saying that Bitcoin has “classic inflation-hedging characteristics,” including its limited supply of 21 million alongside growing demand.

Following this week’s losses, Bitcoin is now up 100% so far this year while Ether 475%. Altcoins meanwhile have recorded insane gains with notable mentions including AXS (21,447%), FTM (11,414%), SAND (11,074%), SOL (10,965%), RGT (9,197%), MATIC (8,708%), and LUNA (6,356%).

The total cryptocurrency market cap has surpassed $3 trillion, up from $1.25 trillion in July this year and $135 billion in March 2020.

Amoroso likened digital coins’ potential to the early days of Netflix Inc. and Facebook, saying that investors should consider crypto’s network value.

“It’s all about adoption. It’s about the number of new wallets. The number of new addresses and we’ve seen that number surge this year.”

“I think there’s a lot more potential ahead.”

Meanwhile, the traditional safe haven asset gold has barely seen much gains as it ranges since hitting its all-time high at $2,075 in August last year, just up 8% from its previous peak in late 2011.

As of writing, the bullion is trading at $1,852 per ounce, up 7.57% in Q2 but down 1.82% YTD.

Traders and investors are caught between concerns over broadening inflationary risks and the prospects of interest rate hikes earlier than expected. The acceleration in consumer prices has heightened concerns that inflation could stay high well into next year.

“While elevated inflation has enticed strong buying interest in gold, expectations of policy normalization by the U.S. Fed and other major central banks amid a sharp recovery in growth remains the key headwind for the metal,” said Sugandha Sachdeva, vice president of commodity & currency research at Religare Broking.

JPMorgan meanwhile said on Friday that it is expecting fiat currencies in Europe, Africa, and the Middle East to suffer due to the prospect of higher core bond yields in developed markets.

“The global inflation narrative is shifting from ‘temporary’ to ‘permanent,’ raising the prospect of a sharp adjustment in core yields,” JPMorgan’s Saad Siddiqui said in a note to clients. “EM FX is unlikely to escape unscathed in this scenario.”

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Bitcoin Trades As An Inflation Hedge for the First Time Ever Due to Gold’s Disappointing Performance

Surpassing $69,000, Bitcoin hit a new all-time high on Wednesday as it traded as an inflation hedge.

“That was the first time ever BTC traded as an inflation hedge. Crypto natives have big pockets now and thus the ability to change narratives. Perception => Reality,” said trader and economist Alex Kruger.

The sharp move up that came after CPI data showed that US inflation rose to its highest annual rate in 30 years to 6.2% in October didn’t last for long, and Bitcoin soon dropped as low as $62,755.

As of writing, BTC/USD is trading at $64,790.

The same has been the case for Ether, which hit a new high at $4,870, dropped just under $4,500, and is sitting just under $4,700. During this round of volatility, the total crypto market cap surged past $3.1 trillion, only to fall under the $3 trillion market but is yet to climb back above it.

As a result of this volatility, 172,576 traders were liquidated in the past 24 hours for more than $700 million, with Binance accounting for 47.4% of it. However, the leading crypto exchange doesn’t provide complete numbers.

The funding rate on Bitcoin perpetual contracts is now, as a result, normalized, currently negative on OKEx and FTX while being the highest on Huobi at 0.0165%.

Earlier this week, the Crypto Fear and Greed Index, which jumped to a reading of 84, has gone down to 77, representing “extreme greed” still, up from “extreme fear” with a reading of 20 in late September.

“People are looking for places to put their money,” commented JJ Kinahan, chief market strategist at TD Ameritrade, on the move.

Currently, people need an asset to invest in that grows faster than the inflation rate, and crypto is among the very few that really outperform here.

USD & Gold Benefited, but Stocks Didn’t

This new high can clearly be explained through the fundamental argument gaining traction in recent months that Bitcoin is an inflation hedge. Unlike bitcoin, whose fixed supply can’t be inflated by a government or a central bank, the US dollar’s 40% of supply came into existence just in the last 12 months.

“Bitcoin continues to enjoy the rally that began in August and accelerated through September and October,” said Sui Chung, chief executive of CF Benchmarks. After Bitcoin futures ETF drove the cryptocurrency prices last month, this month, it “seems to now be fueled by the sustained inflation that we are witnessing across all the world’s major economies.”

The US consumer price index surged as much as 6.2% on an annual basis, with gasoline leading the increase. The number of Americans filing claims for unemployment benefits also fell to a 20-month low.

In reaction to inflation news, the stock market took a dive, in contrast to Bitcoin’s initial upwards move. The hot US inflation reading inflated the worries that it could renew pressure on policymakers to lift interest rates.

Gold was also the beneficiary of investors seeking inflation hedges as it jumped to a five-month high.

US Treasury yields also spiked higher. While yields on the benchmark 10-year note rose by the most since February, real yields that take inflation into account slid to record lows. The dollar index also hit a 16-month high as it surged above 95.

But Gold Not the Preferred Choice

While gold is also advancing, Christopher Wood, Global Head of Equity Strategy at Jefferies, has taken to Bitcoin as he added another five percentage point allocation to Bitcoin in addition to the existing 5% allocation he made last December.

This increase in Bitcoin’s allocation has been at the expense of gold, which is down 2.44% YTD compared to Bitcoin’s 125% uptrend.

But Wood isn’t giving up on precious metal yet either though he said in his weekly note to investors titled ‘Greed and Fear’ that it is risky for aging gold bugs to ignore the reality of Bitcoin being a competitor to bullion as a store of value.

While Ether is not part of his pension fund portfolio as it is not a store of value, Wood said that ETH would likely continue to outperform bitcoin in the coming months. ETH is up 550% YTD.

The growing mainstream acceptance of crypto and the arrival of Bitcoin ETF in the US “means that it is timely to make a further adjustment to the global portfolio for US dollar-denominated pensions funds which was set up at the end of 3Q02 (third quarter of 2002) as a way of hedging the risk of the collapse of the US dollar paper standard,” said Wood in the note.

“In this respect, the performance of gold this year remains hugely disappointing given how negative rates are in America.”

Besides disputing traditional finance, crypto and blockchain technology also has the “potential to trigger the end of the current dollar paper standard,” said Wood, as according to him, the USD paper standard has already been living on borrowed time ever since former US president Richard Nixon removed the gold backing.

“It is increasingly obvious that central bankers in the developed world are now in a trap of their own making in the sense that they have not been able to escape from unconventional policy in the 13 years since Ben Bernanke first adopted quantitative easing in late 2008.”

In the ETF World

The first Bitcoin Futures ETF’s approval led Bitcoin to start its rally last month, marking the beginning of the bullish Q4, which is now continuing this month.

On Wednesday, both Bitcoin futures ETFs BITO and BTF had their biggest volume days in two weeks, noted Eric Balchunas, a Senior ETF Analyst at Bloomberg, adding that the options volume on BITO has also been massive, already seeing about half the options volume as GLD.

Amidst this, Bitwise Asset Management withdrew its application to list a Bitcoin futures ETF, a move made by Invesco as well, due to expensive roll costs as longer-dated typically trade at a premium to the spot price.

The company, however, did keep its filing for a physically-backed Bitcoin fund.

“Ultimately, what many investors want is a spot bitcoin ETF. We think that’s possible,” wrote Matt Hougan, Chief Investment Officer at Bitwise on Twitter.

“So Bitwise will continue to pursue that goal, and we will look for other ways to help investors get access to the incredible opportunities in crypto.”

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Ether’s New Highs Driven by Rising Inflation Can Be A Starting Point of An “Accelerating Rally”

Ether’s New Highs Driven by Rising Inflation Can Be A Starting Point of An “Accelerating Rally,” says Goldman Sachs

Crypto assets have been trading in line with inflation breakeven since 2019, said Goldman Sachs in a recent note to its investors.

Much like all the assets, inflation is driving the crypto market upwards, wrote the bank’s Global Markets managing director Bernhard Rzymelka. And if the inflation pressures continue to persist, crypto assets will keep on seeing their prices skywards.

To Goldman, one particular crypto is looking primed to rise into the stratosphere. This crypto is the second-largest cryptocurrency Ethereum, which hit a new all-time high on Friday at $4,468.

Ether rising to new highs, just shy of $4,500, is “either a sign of exhaustion and peaking… or a starting point of an accelerating rally upon a break higher,” reads the report. While this recent surge appears to be stretched, “the RSI has yet to hit the overbought levels seen at past market highs,” it added.

Up 6.4% in the past week and 490% YTD, Ether has outperformed Bitcoin, which is only up 1% in the last 7-days and 114% year-to-date. BTC -0.44% Bitcoin / USD BTCUSD $ 60,998.76
-$268.39-0.44%
Volume 36.05 b Change -$268.39 Open $60,998.76 Circulating 18.86 m Market Cap 1.15 t
7 h Ether’s New Highs Driven by Rising Inflation Can Be A Starting Point of An “Accelerating Rally,” says Goldman Sachs 8 h Bitcoin Miner Revenue Jumps to 6 Month High, Mining Difficulty Records 8th Consecutive Increase of 7.85% 11 h Not an “Aggressive Buy” At Bitcoin’s High Price, But It Is Indication of A “Crisis Moment,” says Tech Billionaire Peter Thiel

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For Ether, the rise of decentralized finance (DeFi) sector, which has $164.26 bln of total assets locked (TVL), and non-fungible token (NFT) mania are the driving forces.

Additionally, 75,200 ETH, worth more than $2.5 billion, have been burned ever since the London upgrade in early August. Last week, the rally of SHIB token also helped burn more Ether tokens as volatility led to a spike in the fees on the Ethereum network, further helping drive Ether prices higher as well.  SHIB 7.73% SHIBA INU / USD SHIBUSD $ 0.00
$0.007.73%
Volume 8.11 b Change $0.00 Open $0.00 Circulating 10 t Market Cap 39.51 b
7 h Ether’s New Highs Driven by Rising Inflation Can Be A Starting Point of An “Accelerating Rally,” says Goldman Sachs 3 d Web 3 and DeFi Dominates Coinbase Investment in Q3, Hits Top Spot on Apple’s US App Store 3 d Bitcoin Market Is Not as Leveraged as it Looks, Gas Spikes as Ether Hits a New ATH

Goldman Sachs sees Ether surging as high as $8,000 in the next two months if this historical correction with inflation persists going forward.

The backdrop for Ethereum looks supportive as “it has tracked inflation markets particularly closely, likely reflecting the pro-cyclical nature as “network-based” asset,” said Rzymelka.

“The latest spike in inflation breakevens suggests upside risk if the leading relationship of recent episodes was to hold.”

The banking giant cautioned US inflation swaps implying core PCE inflation at or above 2.5% for the next five years, which is a lot of overheating. In reaction to this, the market expects the Federal Reserve to announce the tapering of asset purchases at this week’s policy meeting.

But again, “this lines up rather well with the Ethereum chart, suggesting a late-stage rally with longer-term market top ahead,” said Goldman.

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Assets Under First US Bitcoin ETF Surpasses $1 Billion in Just Two Days

JPMorgan analysts say it is not the Futures-based ETF driving Bitcoin prices but its narrative as a “better inflation hedge than gold.”

The first Bitcoin exchange-traded fund (ETF) in the US made its debut as the second-most heavily traded fund on record.

With a turnover of almost $1 billion, ProShares Bitcoin Strategy ETF’s (BITO) debut was behind only the BlackRock carbon fund, the latter ranking higher due to pre-seed investments.

On the second day, the pent-up demand for the Bitcoin ETF drove the assets held in the investment vehicle to over $1 billion.

BITO ended Wednesday with $1.1 billion under management after volume topped $1.2 billion — the quickest ever $1 billion mark reached by an ETF.

This off-the-chart performance was also reflected in the price of Bitcoin, which made a new all-time high at $67,000 yesterday. As of writing, the $1.22 trillion asset is hovering around $65k.

“It’s a validating moment,” said Jesse Proudman, co-founder, and CEO at crypto advisory firm Makara.

“It’s no longer a question of does this asset class continue to exist — I think that’s a really meaningful mark in the history of the broader digital-asset class.”

According to JPMorgan strategists, it is inflation concerns instead of the first US Bitcoin ETF that is driving cryptocurrency to record highs. JPMorgan’s Nikolaos Panigirtzoglo wrote,

“By itself, the launch of BITO is unlikely to trigger a new phase of significantly more fresh capital entering Bitcoin.”

“Instead, we believe the perception of Bitcoin as a better inflation hedge than gold is the main reason for the current upswing, triggering a shift away from gold ETFs into Bitcoin funds since September.”

JPMorgan analysts have doubts about the ETF bringing in new money because of a “multitude” of options related to Bitcoin already available.

“CME OI futures rampup (+90% in October) combined with the massive BITO volumes tells me they are wrong. Impossible to be 100% sure ofc, and there seldom is a single driver behind the wheel. Either way, bullish,” commented trader and economist Alex Kruger.

However, that’s just the beginning, as Bitcoin futures ETFs from VanEck and Valkyrie are also potentially coming to market this month.

Valkyrie has won the approval of the U.S. Securities and Exchange Commission (SEC) and will start trading on Friday. It will trade on Nasdaq under the BTF ticker. VanEck’s Bitcoin futures ETF is also slated to start trading early next week.

This is already leading to a race to cut costs, with VanEck’s ETF (XBTF) carrying a management fee of 0.65%, lower than BITO’s 0.95% expense ratio.

“The decades-long fee war has a new battle with Bitcoin ETFs,” Todd Rosenbluth, head of ETF and mutual fund research at CFRA.

“When an ETF comes to market second or third with a nearly identical product, it can be at a disadvantage unless it can stand out with a lower fee.”

Meanwhile, the BITO ETF, according to Vanda Research, was likely ignored by retail traders.

Retail investors bought $7.68 million in BITO shares on Tuesday, well below the $57 million shares of Coinbase in April, it said in a note.

Instead of retail, it was likely a combination of funds, investment advisors, and private banking clients shorting the ETF to gain from contango — the prices for future contracts being higher than the spot price.

“[Most] pundits interpreted the massive trading volumes as a roaring success for BITO. From retail investors’ perspective, it wasn’t as much of a blockbuster,” wrote Vanda analyst Giacomo Pierantoni and senior strategist Ben Onatibia.

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Bitcoin’s the Way to Go As Inflation Records Its Highest Jump in 13 Years

The USD is getting a boost from high inflation concerns, with traders now looking forward to the Fed Chair’s testimony this week. Blackrock CEO is also concerned about inflation which he says “is going to be more systematically,” noting asset owners are the biggest beneficiaries of monetary policy.”

The US dollar continues to be perched above 90 since early last month, now aiming for 93 after data showed that US inflation for June is coming in hotter than expected. Just like the greenback, US Treasury yields also responded to the inflation data with a sharp rise.

US consumer prices rose by the most in 13 years last month as the economic recovery continues its momentum.

The rate of inflation in the 12 months ended in June jumped to 5.4% from 5%.

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However, this is to be expected as up until recently, there was a tight lockdown in the country, and still, not everything is open or operating at a standard rate. The rapid recovery of the economy is having an unwanted side-effect, higher inflation.

Transitory or Not?

In June, the cost of living jumped by the most significant amount, 0.9%, more than expected, since 2008 as inflation spread more broadly through the US economy, raising questions whether this spike in prices will subside as quickly as the central bank is predicting.

While the cost of used cars accounted for over one-third of this increase, prices for food, energy, clothing, hotels, and plane tickets also rose sharply, which also fell sharply in the early stages of the coronavirus pandemic last year.

Another measure of inflation that omits volatile food and energy also surged 0.9% in June, with the 12-month rate increasing to 4.5% to stand at a 29-year high.

While the component not associated with the used car market being twice as large, used car prices should also “probably be seen as some sort of bellwether in this case, instead of something to be ignored,” wrote analyst Mati Greenspan in his daily newsletter Quantum Economics.

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Blackrock CEO Larry Fink is also concerned about inflation. “It is my view that inflation is going to be more systematical. I believe it is a fundamental, foundational change in how we navigate economic policy,” he said in an interview with CNBC.

He further noted that with interest rates low, savers are getting slammed while “asset owners are the biggest beneficiaries of monetary policy.”

Market Reaction

Traders are now looking forward to Federal Reserve Chairman Jerome Powell’s testimony before Congress on Wednesday and Thursday for any signals on potential tapering. Fed officials first made a surprise shift in tone last month about the possibility of US stimulus withdrawal that boosted the dollar in recent weeks.

Powell, however, has repeatedly been stating that high inflation will be transitory as supply chains normalize and adapt.

The stock market waved off these latest figures, with the S&P 500 seeing a slight drop after roaring to new all-time highs on Monday. Greenspan said,

“The stocks really are in a euphoric mode right now, and investors will accept any reason to continue buying the rally.”

Cryptocurrencies meanwhile remain on the back foot since late May when they first started selling-off with the total crypto market cap now at $1.34 trillion.

This week, the crypto market is experiencing losses across the board, with Bitcoin doing its thing and trading above $32,500, recovering some from its fall to $31,565 in the last 24 hours and Ether at just above $1,900 after falling to $1,860.

While down in the past two months, in the past year, when commodity prices rose between 20% to 107%, Bitcoin rallied 250%.

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Senator Ted Cruz: Investors Attracted to ‘BTC as a Hedge’ Against Inflation Due to Biden’s $7T Spending

Senator Ted Cruz: Investors Attracted to “Bitcoin as a Hedge” Against Inflation Due To Biden’s $7T Spending

Senate Foreign Relations Committee member Ted Cruz, R-Texas, believes Bitcoin has a lot of potential.

In an interview with Sean Hannity on Fox News, when asked about the cryptocurrency, Sen. Cruz said its growth is the result of inflation caused by monetary policy.

“I think it has a lot of potential. I think we’re seeing enormous growth in it. I think part of the reason we’re seeing people go to Bitcoin is because we’re on the verge of an inflation crisis. Joe Biden has proposed $7 trillion in spending and we’re seeing inflation.”

Cruz pointed out how the prices across different sectors have been going up, which is prompting people to turn to BTC as a hedge.

“We’re seeing lumber going up, homes going up, oil going up, gasoline going up, energy going up, commodities going up and I think people are going to Bitcoin as a hedge against that.”

However, he noted that there is an inherent risk with Bitcoin as an investment.

“That being said, it is a new cryptocurrency. To be honest, I don’t understand it. I think a lot of people don’t, and so I would say it has upside, but there’s risk there.”

Cruz’s bitcoin endorsement could be of significance as Bitcoin is particularly popular among millennials who see it as digital gold, a store of value, while 37% of Fox News viewers are 65 or older, according to research from 2020.

Not only the older generation has found it hard to grasp the cryptocurrency, but they are also the ones with the big pockets, with the biggest ever generational wealth transfer involving trillions of dollars underway.

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Olives Are A Better Inflation Hedge Than Bitcoin, says “Black Swan” Author

Olives Are A Better Inflation Hedge Than Bitcoin, says “Black Swan” Author

Olives are a shitty monetary asset, contrary to what bitter nocoiners may claim, counters Saifedean Ammous, author of The Bitcoin Standard.

Once a Bitcoin enthusiast, “Black Swan” author Nassim Nicholas Taleb has become a critic, calling it a “gimmick” and “Ponzi” now.

In an interview with CNBC on Friday, Taleb said the trillion-dollar cryptocurrency is also too volatile to be an effective hedge against inflation.

“Basically, there’s no connection between inflation and bitcoin. None. I mean, you can have hyperinflation and bitcoin going to zero. There’s no link between them.”

“It’s a beautifully set up cryptographic system. It’s well made, but there’s absolutely no reason it should be linked to anything economic.”

To fight this inflation, investors would be far off purchasing property than buying bitcoin. Even olives would be better, he said, “You’ll have olive oil. If the price collapses, you’ll have something.”

In counter-argument, Saifedean Ammous, author of The Bitcoin Standard, said,

“Olive oil isn’t just glorified lubricant, it’s also a shitty monetary asset, contrary to what bitter nocoiners inflamed from the lack of proper Mediterranean meat nutrition may claim.”

“Not only is olive oil a terrible money, it is also very difficult to verify, unlike bitcoin. It doesn’t have full nodes, and even sophisticated scientific testing isn’t enough to determine if it’s been mixed with rapeseed & canola industrial waste.”

A Game of “Pure Speculation”

To Taleb, bitcoin has characteristics of a Ponzi scheme that’s right out in the open.

His initial support to the cryptocurrency, apparently, Taleb was “fooled by it” because he thought it could develop into a currency.

“Something that moves 5% a day, 20% in a month — up or down — cannot be a currency. It’s something else,” said Taleb. But as legendary value investor Bill Miller said, “volatility is the price you pay for performance.”

Currently trading just under $50k, down from last week ATH of $65k, BTC price is still up over 1,215% from March low.

“I bought into it … not willing to have capital appreciation, so much as wanting to have an alternative to the fiat currency issued by central banks: A currency without a government.”

“I realized it was not a currency without a government. It was just pure speculation. It’s just like a game … I mean, you can create another game and call it a currency.”

Nassim Nicholas Taleb “Black Swan” Author

Given that Bitcoin is the best performing asset of 2021 and was also of the last decade, in spite of the fact that Tesla and other companies accept it as a form of payment, it makes complete sense people are more interested in it as a store of value than spending it on a daily basis.

In the light of growing demand and designed supply cap, the price target for Bitcoin is anywhere between $100k to $1 million in the future.

But for Taleb, that doesn’t matter, as “bitcoin could go to $1 million,” and it wouldn’t change his argument.

“These gimmicks, you have bitcoin today. You may have another one tomorrow. They come and go, and there’s no systematic link between them and the claims they make.”

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Billionaire ‘Bond King’ Jeffrey Gundlach Calls Bitcoin a Good Hedge Against Inflation Risk

Investors should be protecting against inflation, and Bitcoin and gold are a good hedge against that risk, said Jeffrey Gundlach, the billionaire chief executive officer of DoubleLine investment firm, in a webcast hosted by Rosenberg Research on Monday.

He also said that he is bearish on long-dated bonds during the webinar, like the 30-year Treasury. But in a deflationary environment, he still thinks, “you’re supposed to own some” to hedge against the risk of deflation. And some cash too.

Gundlach doesn’t have any love lost for Bitcoin even still, and he remains a proponent of the yellow metal, the traditional store of value, as he thinks gold is a good holding for the tail risk down the road, which according to him, will go up very substantially over time.

Previously he had said that he has “no interest in this type of maniacal type of trading market,” in reference to crypto.

Although the bond king did say in January this year that bitcoin will reach $15,000 in 2020, “it’s just about time for the dollar to weaken,” last month in an interview with RealVision, he said he doesn’t believe in the leading digital currency, calling it a “lie.”

“I don’t believe in bitcoin. I think that it’s a lie. I think that it’s very tracked, traceable. I don’t think it’s anonymous,” said Gundlach to add later that he was “not at all a bitcoin hater.”

On Monday, besides Gundlach, Chris Zarou, founder and CEO of Visionary Music Group, also publicly announced his support for Bitcoin as he said, “I’m irresponsibly long Bitcoin.”

As Bitcoin’s price enjoys a rally in 2020, recently hitting a 34-months high and currently up 86% YTD as it trades around $13,740, the digital currency is attracting a lot of attention from everywhere; corporates, mainstream media, and potential investors.

Also Read: CEO Michael Saylor Personally HODLs 17,732 BTC ($235M), While MicroStrategy Plans to Buy More

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Author: AnTy