March 28, 2024

Former Bridgewater Analyst: The global monetary system is a bigger bubble than Bitcoin.

Former Bridgewater Analyst: The global monetary system is a bigger bubble than Bitcoin.

Author: TYLER DURDEN

Presented by Howard Wang, Co-founder of Convoy Investments and formerly at Bridgewater

In DecemberIn 2017, I wrote an article “What leads toasset price inflation ”, it published the chart you see below. A couple of days later, Bitcoin prices peaked and fell 85% in a year. Bitcoin is back today. I believe we are in the midst of yet another bubble, but this time I'm not sure when it will climax. The graph below is an updated version of that graph.

Former Bridgewater Analyst: The global monetary system is a bigger bubble than Bitcoin.

Let's stop fooling ourselves.Bitcoin in its current form is not a viable candidate for a replacement currency. If we were to measure annual US inflation in Bitcoins rather than dollars, you would see 275% inflation in 2018, -50% deflation in 2019, -75% deflation in 2020. A healthy society cannot function with such unstable prices. The currency needs to be stable enough that if you get paid on Friday, you'll know what kind of dinner you can buy on Sunday. Perhaps Bitcoin will mature someday, but for now it is more of a speculative asset.

Bitcoin is almost certainly in the nextbubble, and its current growth rate is unstable. If 2021 turns out to be the same as 2020, Bitcoin's market capitalization will be larger than the entire US currency in circulation.

Former Bridgewater Analyst: The global monetary system is a bigger bubble than Bitcoin.

Still, this time I’m not sure I can.predict the top. The world monetary system is in an even bigger bubble. Investors are forced to hold $18 trillion in negative-yielding debt while trillions of dollars are printed around the world. Investors are drowning and are grasping at cryptocurrency as a lifeline.

While consistently low profitabilitywill lead to higher prices and suppression of expected returns in all markets, many investors will prefer unknown expected returns on risky assets to guaranteed losses on bonds. Like panicked prey pursued by predators, investors prefer to hide in markets that lack fundamentals, or in assets that have grown rapidly and still have plenty of room for imagination, such as Tesla.

In the short term it still remainsthere is a lot of cash reserves from the incentives, plus some organizations are betting on the cryptocurrency space. This Bitcoin party can continue as long as rates remain low and the printing press is hot.

Bitcoin is the other side of the same coin thatand monetary currencies. Its long-term fate depends on the future of our monetary system. Since the 1980s, deflationary pressures have led to lower interest rates and ultimately the need to print money around the world. As long as this trend continues, investors will avoid guaranteed losses on government bonds. Capital will flee up the risk spectrum, pushing prices higher, lowering yields and creating inflated asset prices.

While the world is flooded with money and safe assetsoffer meager compensation, Bitcoin will be relevant. Volatility and asset bloat will become a reality. It will be difficult to predict the tops of these bubbles, because the core of the money currency with which we measure prices is itself in the bubble.

Source

"Elliott Wave Theorist": in Russian

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