Stocks and oil just broke out to recovery highs, gold continues its seemingly inevitable march toward records, copper is back to pre-COVID levels, and bonds are pushing out of their four-month long range. Our budding “Everything Rally” is missing one exciting player: Bitcoin. The King of Swings, is, well, stuck – Bitcoin hasn't moved in three months! While some will argue a drop in volatility makes it more appealing to some investors, that's not what's important for Bitcoin. Bitcoin needs to keep rallying, make new highs, pay off investors, and create new believers. It's also particularly damning because Bitcoin has been sold as a hedge to the purported perils of central bank profligacy. Thus, Bitcoin should be more in demand than it ever has been, but instead it's stuck right in the middle of its two-year range. The narrative of owning the asset has only increased over that time, but the technical price trends are moving lower. That means people aren't buying the story that cryptoknights are selling. Nothing is more important to Bitcoin than widespread adoption. Many have noted Bitcoin's correlation with stocks in 2020, but its horizontal move since March also looks a good bit like the 10-year Treasury. Bitcoin overlaps most with equities as a risk asset when the driver is central banks trying to stoke growth. Similar to high-flying tech stocks in the NASDAQ, the idea of exchanging safety plays for big returns likely won't last if the economic recovery is real and more investment alternatives present themselves. More important to Bitcoin than the direction of stocks is the direction of interest rates, and despite huge amounts of stimulus hitting the economy, Bitcoiners’ dreams of negative U.S. rates have been on hold since March. So too is Bitcoin itself.
July 23, 2020 9:22 AM | 1 min read |