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


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.

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.