Bitcoin Is a Big Deal – And It’s Getting Bigger

Bitcoin was trading around $50,800 as of midday Monday, up a little more than 4% over seven days, though down about 0.7% from midday Sunday.

I’m neither a cryptocurrency expert nor a “technician” when it comes to evaluating stocks and other asset classes.

I’m more of a big-picture, 30,000-feet guy. I like to tell macro stories. But details like those experts and technicians are able to provide are indispensable to the stories I like to tell.

I understand that recent price action reads “bullish” for Bitcoin and the crypto market at large, as Dr. Martin Weiss noted on Monday.

At the same time, its rise portends something bigger, a dynamic “feedback loop” that should drive this newfangled, scarce-by-hard-code asset class … well, a lot higher than it is now.

This retweet-with-comment by Grimsby of Jim Bianco captures something that not a lot of people – investor or otherwise – care to contemplate: the end of the U.S. dollar as the global reserve currency.

Bianco himself was referring to a Feb. 14, 2021, opinion piece in the Financial Times by Rana Foroohar with this headline: Bitcoin’s rise reflects America’s decline. 

Here are the “money” paragraphs:

Central bankers have over the past 10 years (or the last few decades, depending on where you put the marker) quashed price discovery in markets with low interest rates and quantitative easing. Whether you see this as a welcome smoothing of the business cycle or a dysfunctional enabling of debt-ridden businesses, the upshot is that it’s now very difficult to get a sense of the health of individual companies or certainly the real economy as a whole from asset prices.

The rise in popularity of highly volatile cryptocurrencies such as bitcoin could simply be seen as a speculative sign of this U.S. Federal Reserve-enabled froth. But it might better be interpreted as an early signal of a new world order in which the U.S. and the dollar will play a less important role.

Now, the recent spike in interest rates has Federal Reserve watchers wondering what comes next from its bag of extraordinary monetary tricks. Raoul Pal has a loaded answer:

If what comes before has you concerned, that last line – “This would be a seismic shift and = BTC [rocket ship emoji].” – should have you at least intrigued.

Here’s our own Sam Blumenfeld, writing in the Friday, March 5, edition of Weiss Crypto Alert, with some context:

While it’s encouraging to see a bump in prices this week, the market may experience near-term volatility. We may not be out of the woods after this week’s slight recovery, as the correction could continue despite our long-term bullish outlook.

It’s difficult to time exact highs and lows within the crypto market, but Bitcoin’s fundamentals look stronger than ever. As inflation fears ramp up, Bitcoin provides a safe haven with its strictly limited supply.

Traditional equity markets and tech have continued to sell off on fears of inflation, and Federal Reserve Chair Jerome Powell doesn’t look to be changing his tune about quantitative easing.

Unemployment still trails targets despite a better-than-expected jobs report, so the Fed will likely continue its accommodative monetary policy. More fiscal stimulus is likely on the way too, and Bitcoin’s adoption and use-case constantly improves as the printing and spending move full steam ahead.

We’ll be keeping a close eye on short-term choppiness, but our bullish long-term thesis is playing out even more positively than expected.

As I said last week, as the market leader was making its way back above $50,000, “it’s a good idea to watch it before the next leg of Bitcoin’s rally begins, and that could be any time now …” 

Best,

David Dittman