Bitcoin & Gold in Lockstep
Over the past few months, the Bitcoin (BTC) price trend has been eerily similar to that of gold. While some have cast aside this correlation as a pure coincidence, citing the fact that they see the two assets as polar opposites, many suggest that the correlation is fundamentally-backed.
According to eToro’s Mati Greenspan, the reason why Bitcoin has been rallying alongside its physical counterpart is due to the liquidity that central banks have begun to pump into the global economy.
As the popular crypto-friendly analyst explained on Twitter, this is a result of capital from stocks flooding into alternative assets, due to a search for stores of value and ways to mitigate against a U.S. dollar devaluation, which is already starting to occur against some foreign currencies (Canadian Dollar, Japanese Yen, for instance).
This would seemingly be the case. As Max Keiser of RT explained in a recent television segment, the BTC bottom at $3,150 was put in when the Federal Reserve announced it was going to be dovish, meaning it is actively looking to instate the next round of quantitative easing.
More importantly, the search for safe havens was recently made even more important with a tweet from Donald Trump.
Seen below, the businessman-turned-leader accused China and the European Union of manipulating their currencies, and “pumping money into their [economic] system in order to compete with the USA.”
What the American leader is presumably referring to is the skewed balance sheet of Europe and the rumors that China’s (anti-crypto) central bank is toying with the forex market to improve the optics of its current account.
To counter this supposed manipulation, Trump urged the Federal Reserve to “MATCH” the fiscal policy of the aforementioned regions’ respective central banks.
As markets analyst Alex Kruger explains, this will result in lower interest rates, a cheap dollar — foreign currencies have already begun to move against the U.S. Dollar; and soaring stock markets, which will be pushed higher by greater exports and investors rushing to escape an inflating currency.
So, why exactly is this bullish for Bitcoin and gold?
Well, as Travis Kling, the libertarian chief of crypto fund Ikigai, has hinted at, with a low-interest rate environment, hyperinflation, a sovereign debt default, and other horrible economic events become that much more likely. As Kling likes to quip, “[this is] brazenly bullish for a non-sovereign, hardcapped supply, global, immutable, decentralized digital store of value.” By this, the former Wall Street fund manager obviously means Bitcoin, but gold kinda fits the bill too.
All this comes as BTC has begun to gain traction as a viable store of value in today’s economy. As reported by Ethereum World News previously, two mainstream media contributors, Jim Iuorio of CNBC and Tyler Cowen of Bloomberg, have both lauded the leading cryptocurrency as a way to hedge against fiscal/economic uncertainty.
Photo by Dmitry Moraine on Unsplash