If Bitcoin is digital gold then it’s about to crash

See the latest Australian dollar analysis here:

Australian dollar pops and drops on Evergrande vs Fed

Some claim that Bitcoin (BTC) is a medium of exchange. Others claim that BTC is a store of value. It’s clear that nobody really knows what it is beyond an obvious ponzi scheme.

However, if it is store of value, marketed as “digital gold”, then it should respond to the same price drivers as gold. These are US interest rates and the value of the US dollar.

If so, then BTC is about to crash. Real US interest rates are marching higher with bond yields:

The US dollar is bottoming as well on this development. Most especially because it has a mushrooming vaccine, growth, inflation and yield advantage to Europe.

As such, gold has been poleaxed:

And, so far, so has BTC:

Though no more than gold:

Given BTC is more volatile than gold, it should arguably be falling much faster than it is. An adjustment that lies ahead if it is “digital gold”.

That said, it won’t be one-way traffic. If yields get out of hand then the Fed will step in with more QE to sit on the long end of the bond curve to protect American mortgages.  That would off BTC some respite.

But, if BTC is “digital gold” then the bottoming of real rates and US dollar means it has peaked for this cycle.

Of course, BTC may be something else altogether.

Nobody knows.

Houses and Holes
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Comments

  1. Gold has over 10x the Market Cap, short term it should be more volatile.

    But over time if accepted as digital gold, it may have room to grow as adoption moves in the direction of Bitcoin.

    • the Bitcoin naysayers just seem to ignore that fact. When / if Bitcoin becomes digital gold it can move in the same fashion as gold. But it has 5-10x to go until it gets there.

  2. DingwallMEMBER

    “Nobody knows” … except the “experts” who will be here shortly…………

    • My view has been that BTC is like a piece of Picasso – much more difficult to understand than gold.

      Nobody knows its intrinsic value but many people want a piece of it because they think it is good just because some experts said it is good, not because they understand arts.

      • China PlateMEMBER

        “If it is art, it is not for all, and if it is for all, it is not art.”
        and nice one Dingwall

  3. Good commentary from Lyn Alden on Bitcoin’s correlation in the last Macrovoices podcast.

    • Lyn Alden is so good.

      She has this fantastic article on her website about the collapse of the petrodollar.

  4. BTC and gold are both anti-fiat. If you think the Fed has no guts to break out of the QE infinity quicksand, which is a good bet, then you should be long BTC/gold.

    The only trouble is BTC/gold are both expensive.

    • BTC is still cheap. I think around 1-2% of the Earth’s population currently own it. Massive potential for growth.

      • I cannot see a barrier that can prevent other crypto currencies to enter the field. Unlike gold, BTC has unlimited competition.

        • It’s had around 6000 competitors in 12 years and they have all failed to best it. BTC is the one everyone wants. It got in first and was good enough that no competitor could overhaul it.

  5. PolarBearMEMBER

    DLS has banned all the bitcoin evangelists so he can be a dinosaur in peace! Ha ha I can’t make my mind up about it either. The biggest risk is regulation. Other aspects of bitcoin are quite admirable in my gen x opinion! Maybe reg risk is not too bad if bitcoin stays on the digital gold side of the spectrum and doesn’t threaten true currencies with too much activity on the medium of exchange side of things.

    • Cynical snake

      AUD has already been almost completely replaced as a medium of exchange thingy by Aussiebanktokens.

      That may be a slight exaggeration but plenty of places are eftpos only these days.

    • I’m not banned yet, but my membership is running out, so it’s likely I’ll be gone soon enough. Just hanging around mostly to help out others with BTC information. If the proprietors change their position on it then I might re-subscribe.

  6. pfh007.comMEMBER

    Bitcoin is a vote of no confidence in the Debt Peddler controlled public monetary system.

    Is it really a surprise that there is a lot of enthusiasm for alternatives to the tumour ridden state/ private bank cartel.

    Which is unfortunate as the public monetary system without the debt peddler parasite could be the best thing since sliced cheese.

    It is amusing how defenders of debt peddler money as public money talk about the inherent weakness of crypto.

    But then we should expect that parasites will confuse their interests with those of the host.

    • We can’t really reform the old system. The old system is decrepit. Capital is slowly trickling out of it. The trickle will become a flood at a certain point.

      If I was you I’d forget about all this reform stuff. It’s too late now. The die is cast.

      • pfh007.comMEMBER

        We can reform the system but it is hard to argue with your assessment that it will not happen.

        Amongst the policy class and political class and the 4th estate there seems to be no serious interest in fixing the problem or even acknowledging that a problem exists.

        It is all foot to the floor and see how far we can fly over the cliff edge.

    • SweeperMEMBER

      Even you must see the irony here. All the debt has backing in the form of real assets or claims on them which all produce current and future cash flows.
      Bitcoin has no backing at all it is the ultimate fake warehouse receipt.
      People trading empty boxes hoping the next buyer isn’t the one to open the box.

      • pfh007.comMEMBER

        I see the irony in you talking about irony while producing pearls like this.

        “.. All the debt has backing in the form of real assets or claims on them which all produce current and future cash flows…”

        As if that matters to the asset price pumpers.

    • FUDINTHENUDMEMBER

      Wonder of we can get the tulip bubble up again if we start posting about them on reddit

  7. Financial commentators who get Bitcoin wrong are going to find at some point it will be really bad for their reputation.

    There are some great Bitcoin channels on YouTube. I recommend Investors Podcast Network. Preston Pysh has done some fantastic interviews. As well I would recommend books like Layered Money and people say that the Bitcoin Standard is also a great book though I haven’t read it yet.

    The truth is out there for those who are willing to spend some time looking for it. You won’t find it by staring at charts and listening to Peter Schiff.

    • And CoinDesk is a great website.

      Oh plus, Michael Saylor interviews. They are a must listen.

    • Is a Bitcoin channel any chance of delivering more than pre-determined “truth” and confirmation bias? What if Bitcoin is a trap invented by Central Banks?

      • Don’t worry. They aren’t for you. They are for interested, open-minded people who like to listen to arguments and decide for themselves. You are free to ignore.

        • The obvious effect of bias here is that anyone who doesn’t agree on the view or “truth” or the source of information, isn’t open minded and hasn’t done the research …. it’s entirely unreasonable and sounds a bit like religious indoctrination to me. Far from ignoring it, I’m following along with great interest.

          • Some of us can even listen to propaganda without it affecting us negatively and dismiss it as such after we have seen it. We don’t have to worry about whether something we are about to watch or read is propaganda or not and can just approach everything with an open mind.

            Handy skill because then you get to see both sides of every story.

  8. MathiasMEMBER

    I know everyone talks about this stuff like its ‘ just economics ‘ and ‘ just markets ‘… but all I see is the risk profile increasing as economy continues to deteriorate.

    Can you imagine in a couple more years?

  9. SweeperMEMBER

    It’s not correlated to anything because it’s a completely rigged market, except during extreme risk off when their is forced selling.

  10. Bitcoin has been remarkably successful and resilient in its 12 years or so of existence and a lot of people have had a crack at it in that time. Some serious people and institutions now own it. It may be a ponzi but so what? Ultimately no-one knows where it will go and any jaw boning on this site will be of no consequence. Place your bets.

    • Everything is a Ponzi now- its just the Ponzi flavour of the month. If real interest rates continue to rise like bcnich predicts all these Ponzi’s will collapse