“Correlation is not causation” is a statement that always makes me laugh. Apparently, eating cheese and strangling in bed correlate and therefore prove this maxim. I say instead, everyone knows that eating cheese creates bad dreams and struggling in bed will increase your chances of unhappiness.
Indirect causation is certainly one thing.
So when you see the following it raises all kinds of questions:
Bitcoin is supposed to be an uncorrelated asset, but when you see it correlated with gold, you can be sure that is not true. Bitcoin is “digital gold” and gold is simply “gold”.
Bitcoin is so much easier to own, move, buy and sell, and cheaper and easier to keep safe than gold. Gold, however, is much slower, less volatile, and proven. They are both paradises. So when you see the gold and bitcoin rally, something just happened and you will be reading it in a few days.
Gold as an asset is difficult. US gold stocks are highly rated; physical gold is difficult to buy without paying a huge premium; paper gold remains a bit worrying. It’s no wonder people looking for shelter jump straight into bitcoin, which is just a click away.
Any crisis will strike both vertically, but the hidden threat that the market is struggling to absorb is soaring inflation. Is it transient as promised or is it just a start?
If the value of money continues to fall, then all assets will rise. Unfortunately, this will not be a smooth process, as inflation will break the mechanism of the savings that we are used to and make it difficult to know if you have actually gotten richer or if you end up with more worthless zeros on your balance. staff. leaf.
I’m ear to ear in precious metals because it seems to me the price is wrong. At some point, investors and traders will make the effort to break through the entry barriers into precious metals inflation hedging, and then the entire industry will reassess prices.
I am a crypto bear in the short to medium term, but if there is one variable that could truncate the crypto winter it will be inflation…. and it comes.
If it’s inflation that’s driving bitcoin down then the best way to be sure will be to look at gold and if it’s up you might be in luck.
Meanwhile, the market is trying to get a feel for the future of inflation, which seems clear to me. It won’t be a long wait. When gold hits new highs, it will be time for people with a lot of cash to start running for shelter.
Clem Chambers is the CEO of the private investor site ADVFN.com and author of 101 Ways to Pick Stock Market Winners and Cryptocurrency Trading: A Beginner’s Guide.
Chambers won the Journalist of the Year award in the Business Market Commentary category at the State Street UK Institutional Press Awards in 2018.