Bitcoin’s price at the time of writing is $11,313. The cryptocurrency market has seen a significant pullback recently, most of which I attribute to the dovish Fed’s call to cut interest rates and proceed with devaluating the dollar further; stimulating the economic growth in the short term.
The latter was confirmed when the S&P500 stock index grew to all-time highs. The price of gold followed suit. Only the cryptocurrency market suffered, which confirms newfound thesis’ that Bitcoin is acting as a hedge not only against geopolitical risks but against adventurous monetary policies and inflation.
Recent statements by Powell, the media and even the US president himself show that Bitcoin is becoming more legitimate by the day. While some say that it is not a currency, it is at the least an asset or a digital store of value, a speculative save haven — much like gold.
While the stock market seems to be flourishing at the moment, it is essential to keep in mind the devastating consequences these monetary policies will have on our economies. It is set in stone that the global currencies like $, € and CNY are set to devalue. When the time comes for stocks to turn downward, the fall will not be graceful.
If you have any experience with the Bitcoin bubble of 2017, the situation is now replicated in the stock market, while the crypto market is much more healthy and rationally valued this time around.
So, investors or anyone looking to secure the value of their capital are asking themselves only 1 question:
Not when, but where will they store their wealth? The recent Bitcoin rally was arguably sustained by institutional investors. The correlated fall of the crypto market on the day of bullish news for stocks confirms this fact.
Prior to all of this, with the constant threat of China-USA trade wars, currency inflation, global economic slowdown there was a good incentive for Bitcoin to rise. Now that the threats are temporarily offset, the money is leaving the market, but it is safe to say that it will be coming back — sooner than you think. The stock market can take a downturn at any time and it will.
And when that happens it won’t be pretty. Gold has already begun rising in stride with the stock markets, which makes no sense, following traditional logic. Gold prices rise when the stock market’s decline. Unless there are people already anticipating a crash and diversifying appropriately.
Gold is a 7 trillion market, Bitcoin is currently at the $220b size. Bitcoin has factually proved to be a waypoint for investors to hedge against losses, while it is young and small, it is tested and recent claims by government officials, media and even Facebook’s Libra can attest to its legitimacy. In a catastrophic event and panic, its price can rise rapidly.
