Forget “inflation hedge” – bitcoin is probably investable simply because it is separate from the “heads of state.” gckaloudis writes in this week’s Crypto Long & Short newsletter.
“... [H]istory suggests that the [Fed’s] decision [on interest rates] will remain far below the [necessary] interest rate which is required to deal with inflation. For much of the 1970s and 1980s, the last time we saw comparable price inflation, the rate that the Fed set was somewhere between 8% [and] 20%, many times higher than what the Fed is suggesting now.
Supply is outpacing demand because we went from a world where a) cheap immigrant labor in the U.S., b) cheap goods from China and c) cheap Russian gas propped up low inflation to a world where a) nativist immigration policies drove wage pressures in the U.S., b) China’s zero-COVID-19 policy hurt the flow of cheap goods and c) a Russian war in Ukraine has led to skyrocketing gas prices in Europe prop up high inflation.… where heads of state matter more than heads of central banks.”: bitcoin.
I’m not sure the data strongly supports this idea. Sure, there’s a visual relationship in the previous chart, but the rolling 30-month correlation coefficient between U.S. M2 and bitcoin’s value moves from negative to slightly positive . Statistically, this doesn’t really tell you anything. Maybe the move is due to bitcoin maturing over time as it approaches its final resting place as an inflation hedge? I know the U.S. doesn’t stand in for the entire world economy, but still.
Second, and more concretely, if you agree that we are in a war economy “where heads of state matter more than heads of central banks,” bitcoin is probably investable simply because it is separate from the “heads of state.
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