I am very skeptical about the value of Bitcoin. Basically, I think the intrinsic value of Bitcoin does not come from its scarcity like gold, but it only comes from the reliance on the fact that Bitcoin is able to be exchanged with fiat currencies in exchanges. That's all of the intrinsic value of Bitcoin, that's all.
Anyway, given that Bitcoin is "digital gold", we should have a look at the relation with gold and the recent move of the gold price, shouldn't we?
BTCUSD/GOLD
The ratio of Bitcoin to Gold reached x10, the current level is just at the huge phycological level.
In the previous bubble, the ratio reached x15, but this deviation will not get wider since Bitcoin is now more well-acknowledged as "Gold".
GOLD
Next, we should look at the recent gold price move.
Gold had been bought massively after the coronavirus shock in March as it was seen as the hedging tool for the devaluation in currencies and the global trend of fiscal deficit expansions lasted to the beginning of August.
After the beginning of August, the tone of such expectations for fiscal stimulus went down because the round one fiscal stimulus had been delivered urgently.
Since then, the gold price has been stable at around $1900 and we did not see the massive price action anymore.
Last several days, the gold price plunged and broke the resistance at $1860. This is obviously because the US Treasury decided to pull the unused money for emergency lending facilities from FRB.
The market reaction is quite clear, the US dollar appreciated, stocks are struggling from going up, EM currencies are declining. This is a typical reaction to austerity.
So... look at Bitcoin. Bitcoin has also been pumped up by flooding money after the pandemic as well as other riskier assets. And it still keeps being at the highest level not like other financial assets.
We now have to think about it... Gold or Bitcoin, which one is correct?
I can confidently say that Gold is right because Gold is one of the most matured financial assets and has plenty of liquidity and it exactly follows the policymakers, who rule all of the markets.
Bitcoin is now evaluated as very expensive. This could be because Bitcoin is not that matured assets and a self-reinforcing cycle often occurs which means a bubble tends to happen easier compared to other matured assets.
Now is the time to go short on Bitcoin, the bubble will be over shortly.
Anyway, given that Bitcoin is "digital gold", we should have a look at the relation with gold and the recent move of the gold price, shouldn't we?
BTCUSD/GOLD
The ratio of Bitcoin to Gold reached x10, the current level is just at the huge phycological level.
In the previous bubble, the ratio reached x15, but this deviation will not get wider since Bitcoin is now more well-acknowledged as "Gold".
GOLD
Next, we should look at the recent gold price move.
Gold had been bought massively after the coronavirus shock in March as it was seen as the hedging tool for the devaluation in currencies and the global trend of fiscal deficit expansions lasted to the beginning of August.
After the beginning of August, the tone of such expectations for fiscal stimulus went down because the round one fiscal stimulus had been delivered urgently.
Since then, the gold price has been stable at around $1900 and we did not see the massive price action anymore.
Last several days, the gold price plunged and broke the resistance at $1860. This is obviously because the US Treasury decided to pull the unused money for emergency lending facilities from FRB.
The market reaction is quite clear, the US dollar appreciated, stocks are struggling from going up, EM currencies are declining. This is a typical reaction to austerity.
So... look at Bitcoin. Bitcoin has also been pumped up by flooding money after the pandemic as well as other riskier assets. And it still keeps being at the highest level not like other financial assets.
We now have to think about it... Gold or Bitcoin, which one is correct?
I can confidently say that Gold is right because Gold is one of the most matured financial assets and has plenty of liquidity and it exactly follows the policymakers, who rule all of the markets.
Bitcoin is now evaluated as very expensive. This could be because Bitcoin is not that matured assets and a self-reinforcing cycle often occurs which means a bubble tends to happen easier compared to other matured assets.
Now is the time to go short on Bitcoin, the bubble will be over shortly.