inflation hedge

Speechwriter for Former US President George Bush Says BTC Rally Driven by ‘Historically Low Interest Rates’

23/02/2021 by Idelto Editor

A speechwriter for former U.S. President George W. Bush and a bitcoin critic, David Frum has claimed that the low-interest rates are fueling the crypto asset’s rally. Frum suggests that the crypto asset might experience a “fast and deep price crash” if and when interest rates start to rise.

Institutional Interest in BTC

In comments made via Twitter, Frum, who regurgitates the BTC mining inefficiency claims, also attacks the crypto asset’s store of the value proposition. He states that of “all the pro-bitcoin arguments, surely the worst is the store against inflation.”

Still, despite this criticism, the crypto asset continues to gain support from institutional investors and large companies. For instance, electric carmaker Tesla, which recently amended its investment policy, revealed it had bought BTC worth $1.5 billion.

Furthermore, according to bitcointreasuries.org, the website that tracks companies or institutions that have exposure to BTC, over 1.3 million coins or 6% of the total circulating supply is held by large corporations.

The True Value of BTC

In the meantime, Frum’s remarks about bitcoin have sparked a debate on Twitter concerning the crypto asset’s true value proposition. For instance, in his response to the remarks, Alex Gladstein, the chief strategy officer with the Human Rights Foundation (HRF), reminds the former speechwriter about BTC’s human rights implications. Gladstein, who recently endorsed the crypto asset, said:

Only 13% of humans live under a liberal democracy with a reserve currency. The other 7 billion+ live under authoritarianism or a weak currency. Bitcoin is a powerful tool for them.

Also, another user named Unfettered Nic Carter shares with Frum the other likely outcome of rising interest rates. The user explains that “if interest rates rise, the corporate sector and the government will be insolvent.” Carter then asks: “What do you think is more likely – we bankrupt everything, or we print our way out?”

Meanwhile, other Twitter users like Lepton939 said they were in agreement with the assertion that BTC provides “immunity from inflation.” Nevertheless, this user expresses concern at the crypto asset’s volatility saying:

“Since the price fluctuates so wildly I’m afraid to hold it. But I’m guessing its real value is the scale of illicit transactions it accommodates.”

Still, other users like Jeffrey Smith are praising Frum for making these remarks about bitcoin. In his tweet, Smith remarks:

Exactly. Zero intrinsic value (which is related to your interest rate observation); 100% speculative value (= bigger fool theory); & environmental mess to mine. What’s not to like?

While Smith suggests that “gold is very similar” he is however quick to explain that unlike BTC, the precious metal can be used for making jewelry. He then concludes by saying: “There’s no Bitcoin jewelry as far as I know.”

Do you agree with Frum’s assertion that BTC value will crash once interest rates start to rise? Tell us what you think in the comments section below.

Federal Reserve’s Expected Inflation Ramp-Up Drives Institutional Investors to Hedge With Bitcoin

10/08/2020 by Idelto Editor

The U.S. Federal Reserve is expected to ramp up inflation by keeping interest rates low. As the U.S. dollar falls sharply and gold’s price soars, institutional investors are moving their money into alternative investments, including bitcoin.

Fed Policies Drive Demand for Bitcoin

The Federal Reserve is completing a year-long policy review and “is expected to make a major commitment to ramping up inflation soon,” CNBC reported last week. Investors have been making heavy bets accordingly as evidenced by record-high gold prices, the falling U.S. dollar, and increased demand for Treasury Inflation-Protected Securities (TIPS).

The Fed is expected not to raise interest rates until inflation and unemployment targets are hit. Supporting the Fed’s policies, President of the Federal Reserve Bank of Chicago Charles L. Evans said he would like to keep rates where they are until inflation gets up around 2.5%, the publication conveyed. However, it could take years for the Fed to hit its targets since inflation is currently closer to 1% and the unemployment rate is higher than it has been since the Great Depression.

“We believe that the Fed publicly would welcome inflation in a range of 2% up to 4% as a long-overdue offset to inflation running below 2% for so long in the past,” explained Ed Yardeni, head of Yardeni Research. He calls this approach “wildly bullish” for alternative asset classes.

Some institutional investors are shifting their strategies to reflect the new environment. Citing Federal Reserve Chairman Jerome Powell saying “we’re not thinking about raising interest rates and we’re not even thinking about thinking about raising interest rates,” the CEO of Nasdaq-listed Microstrategy Inc. (ticker symbol MSTR), Michael Saylor, said during the company’s Q2 2020 earnings call:

If you have large dollar values and you’re hoping for any kind of return on them, that’s faded. Gold, silver, and bitcoin are showing strength.

“The dollar, the DXY index is weakening. Faith in fiat currency across the market is fading and we’ve seen that in rallies in most asset classes during Q2,” he noted. “Accordingly, it wouldn’t be prudent to continue to hold a large portion of USD as our treasury strategy, and that’s prompted us to rethink this.”

Microstrategy CFO Phong Le told investors:

We will seek to invest up to another $250 million over the next 12 months in one or more alternative investments or assets which may include stocks, bonds, commodities such as gold, digital assets such as bitcoin, or other asset types.

“Publicly traded companies are starting to diversify their cash holdings into bitcoin,” commented Marty Bent, Editor in Chief of Marty’s Bent, a daily newsletter about Bitcoin. “Boardrooms across the country will begin to ask, ‘Should we be diversifying into bitcoin too?’ Hyperbitcoinization can happen faster than you can imagine. Be prepared.”

Meanwhile, some experts doubt the effectiveness of the Fed’s policies. Peter Boockvar, chief investment officer at Bleakley Advisory Group, remarked:

Just manipulating interest rates doesn’t mean you get to some finger-in-the-air inflation rate that you choose.

Regarding the Fed’s plan to crank up inflation amid record-high unemployment while the economic recovery is in jeopardy, he was quoted as saying: “It doesn’t make any economic sense whatsoever. The consumer is very fragile right now. The last thing we should be shooting for is a higher cost of living.”

What do you think about investors hedging Fed policies with bitcoin? Let us know in the comments section below.

The post Federal Reserve’s Expected Inflation Ramp-Up Drives Institutional Investors to Hedge With Bitcoin appeared first on Bitcoin News.

Only Bitcoin Outpaces G4 Central Bank Balance Sheet Growth

07/08/2020 by Idelto Editor

Investment strategist Raoul Pal says bitcoin is the only asset with a growth rate that outpaced that of G4 central bank balance sheets.

Pal says G4 central bank balance sheets have grown much faster than traditional safe-haven assets like gold.

A founder and CEO at Global Macro Investor (GMI) Pal made the remarks in a Twitter post on August 6.

In the thread, Pal dispels the notion that only gold offsets the dilutive effects of inflation.

“Many of us own gold to offset the dilutive effects on fiat currency of the growth in major central bank’s balance sheets. However, the balance sheet (BS) of the G4 has outpaced the rise in gold.”

Central banks around the world have responded to the Covid-19 by creating money to boost faltering economies.

The associated dilutive effect of the increased money supply has driven investors to seek solace in stocks, bonds and gold.

However, Pal says “only one asset (has) massively outperformed” any G4 balance sheet “over almost any time horizon.”

The CEO says his “conviction levels in bitcoin rise every day. I’m already irresponsibly long.”

While he contemplates his future investment strategy, Pal still suggests “it may not be even worth owning any other asset as a long-term asset allocation.”

Pal’s comments on bitcoin are supported by a recent Bloomberg analysis of bitcoin alongside other assets. The analysis shows bitcoin’s profile as digital gold is growing.

The analysis states:

Stabilizing at about 6x the per-ounce price of gold, bitcoin’s increasing correlation and declining volatility relative to the precious metal indicate an enduring relationship for price advancement, in our view.

The analysis adds the top crypto is moving away from its reputation as a speculative digital asset.

In the meantime, a GMI data screenshot shared by Pal, suggests that in gold terms, the precious metal “has still underperformed by 50%.”

What do you think of Raoul Pal’s remarks about bitcoin? Share your thoughts in the comments section below.

The post Only Bitcoin Outpaces G4 Central Bank Balance Sheet Growth appeared first on Bitcoin News.