Dear Reader,
Bitcoin is currently trading at 47 391 USD.
Manu analysts are extrapolating that Bitcoin could replace gold as an inflation hedge.
Such a premise may well be one of the reasons that the price of gold has not risen really a lot, despite leading central banks creating money by using the printing presses.
Actually, I think it would be difficult for Bitcoin to fully replace gold. Bitcoin's price is significantly more volatile than the price of gold. Which precludes Bitcoin as a very safe investment vehicle. Bitcoin could become more similar to real money, which gold never did due to not fulfilling the functions of unit of account and means of exchange. Many are saying that Bitcoin is USD 2.0, a new global currency. Actually, I think Bitcoin, if it exhibits less volatility, could easily function as money.
But Bitcoin's main usage now is as an investment vehicle, similar to gold. However, when inflation comes, the Federal Reserve, the US central bank, and other leading global central banks will raise their key rates which will raise the general interest rate levels, which on its turn will burst the stock market bubble. Bitcoin is a risky asset which has high correlation to stocks. When inflation appears again, I forecast Bitcoin could well fall a lot.
Much of the money being created by central banks now is finding its way into stocks, real estate, Bitcoin and other cryptocurrencies. But when central banks stop creating money, this could well crash the prices of cryptocurrencies, stocks and real estate assets.
However, the global economy is very weak, so central banks are compelled to go on stimulating growth by buying up assets from the economy and market participants in exchange for money. The electronic cash that enters the economy will go on finding its way into many assets, cryptocurrencies including.
I think Bitcoin and stocks could go on rising for 1 to 2 years more.
Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".
Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.
Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!
Respectfully yours,
Petar Posledovich
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