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📺 Useful Vids 📺
– TIMESTAMPS –
2:14 Micro vs. Macro
4:28 Inflation Concerns
6:06 Hedging Inflation
9:07 Interest Rates
11:18 Rates & Bitcoin
13:25 Monetary Policy
14:57 Fiscal Policy
⛓️ 🔗 Useful Links 🔗 ⛓️
► BVI Inflation Report: https://www.lopp.net/pdf/BVI-Macro-Outlook.pdf
► Inflation Expectations: https://www.federalreserve.gov/monetarypolicy/files/FOMC20091201memo05.pdf
► Bitcoin Displacing Gold: https://www.bloomberg.com/opinion/articles/2021-04-09/bitcoin-is-displacing-gold-as-an-inflation-hedge
► Fed Holding 0: https://bitcoinmagazine.com/markets/as-fed-holds-0-interest-bitcoin-wins
► What Happens When QE Ends: https://www.wsj.com/articles/what-happens-to-stocks-and-cryptocurrencies-when-the-fed-stops-raining-money-11620446420
► Yellen Comment: https://www.cnbc.com/2021/05/04/treasury-secretary-yellen-says-rates-may-have-to-rise-somewhat-to-keep-economy-from-overheating.html
🌎 Macro vs. Micro 🌎
Micro factors are usually those that are specific to the asset in question and only impact on it. Macro factors are more global and tend to shift a whole host of other assets.
Bitcoin is impacted by both factors. You have micro factors such as whale movements, hash rate, network activity, futures market liquidations, tether prints.
Although these micro factors still do impact on the price of Bitcoin, global macro factors tend to have a sizable impact as well.
We are talking inflation, interest rates, currency, trade and economic policy.
📈 Inflation 📈
Inflation is perhaps one of the most relevant factors that drives the Bitcoin investment thesis.
In order to protect themselves from this risk, people are in search for assets that can act as a hedge. Hard assets that are limited in supply and retain their value
While gold has always been seen as the premier inflation hedge, Bitcoin has quietly stolen that narrative over the past year.
There are a number of global macro investors that have adopted this strategy but perhaps one of the most well known is Paul Tudor Jones.
Paul Jones’ 22 Billion dollar BVI fund invested in Bitcoin after he wrote his note on the Great Monetary Inflation. He saw it as one of the most important hedges against this monetary inflation.
It’s not just investment funds that are concerned about this incoming level of inflation. It has also been a dominant rationale for corporate adoption of Bitcoin on their balance sheets.
In Q1 of this year, 47 companies cited ‘inflation’ in their earnings calls. In fact, according to a report by FactSet over here, this was one of the highest numbers of mentions
Many companies have therefore resorted to Bitcoin as a premier hedge and are allocating their capital towards it.
💹 Interest Rates 💹
Interest rates control everything from balance of payments to investments to currency and lending. They are especially important in their impact on economic growth and asset prices.
When it comes to interest rates, one of the most consequential of them all are the rates that are set by the central banks.
When the Fed dropped the rate to 0 last year, this meant that many investors were starved of yield generation opportunities.
This then led these investors looking for more “risk on” assets that could get them that yield that they craved. This was one of the predominant reasons that the stock markets rallied to the all-time highs that we have seen.
Bitcoin is often also viewed as a “risk on” asset which is why it sometimes moves just like stocks in reaction to some of these interest rate shocks.
💴 Economic Policy 💴
Even if policies don’t impact on Bitcoin directly, those that impact on the broader global markets will also impact on Bitcoin prices.
Economic policy can be broken down into two different types and that is:
– Monetary policy: Those that impact on money supply which are determined by a central bank
– and fiscal policy which relates to decisions about taxation and spending made by the government
📜 Disclaimer 📜
The information contained herein is for informational purposes only. Nothing herein shall be construed to be financial legal or tax advice. The content of this video is solely the opinions of the speaker who is not a licensed financial advisor or registered investment advisor. Trading Forex, cryptocurrencies and CFDs poses considerable risk of loss. The speaker does not guarantee any particular outcome.
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