Bitcoin sure ain’t behaving like gold


The two arguments that support Bitcoin as some kind of worthwhile asset for the future are worth revisiting again today. We know that some see it as the currency of the future with a spreading role as an exchange of value. That path is fraught with peril because it is the one in which government taxation and monetary monopolies will be most threatened.

I have argued therefore that the only viable path for BTC is as a store of value that operates as an alternative currency holding debased fiat regimes to account. That is, much like the role of gold.

But, if so, shouldn’t we expect BTC to behave like gold? To fall when the primary reserve currency is strong and to rise when it is weak?

This relationship is holding for gold:


But not for BTC. At least, not in recent weeks as the US dollar rallies strongly, gold sinks but BTC remains bid:

There are a few possible explanations:

  • As a new asset, BTC may still be gathering market share so its bid may be related to increasing penetration into the investment community, offering no signal at all.
  • Or, it might be that BTC is signaling that more US dollar is ahead with further easing from the FOMC, in contradiction with the gold market.
  • Or, BTC may not reference the US dollar at all. It might some new asset that references fiat debasement in general. Like some whacko version of Keynes’s bancor.
  • Or, BTC may not reference anything at all. In which case it is a simple ponzi scheme.

All I can say is that until you can answer any and all of these questions then buying BTC is not so much acquiring as asset as it is taking part in some wild monetary experiment with absolutely no notion of the outcome.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.