While Bitcoin maintained its strong position around $86,000 despite the US dollar reaching its highest levels in 18 months, leading macroeconomic figures assessed the possible scenarios for the cryptocurrency market. The program, featuring Michael Howell, Dave Weisberger, and Bloomberg Intelligence senior commodities strategist Mike McGlone, highlighted global liquidity, the monetization of government debt, and Bitcoin’s unusual resilience against the dollar.
Michael Howell argued that government debt in G7 countries is increasingly being monetized. He stated that the increasing purchase of Treasury bonds by banks in the US effectively constitutes monetization, and that this process could intensify in Western countries in the coming period. According to Howell, the result will not be a collapse of the financial system, but rather a sustained decline in the purchasing power of paper money in the long term. Therefore, he argued, investors need assets like cryptocurrencies and gold that can provide “protection against monetary inflation.”
Regarding Bitcoin specifically, Howell made a rather noteworthy assessment. The renowned macro strategist stated that Bitcoin, and cryptocurrencies in general, are among the most sensitive assets to global liquidity fluctuations, noting that Bitcoin reacts much more strongly to increases in liquidity compared to gold. However, reminding us that Bitcoin has only about 15 years of history compared to gold’s thousands, Howell indicated that while both assets should be included in portfolios, he prefers to give gold a higher weighting due to its volatility.
The program also discussed Bitcoin’s price behavior in recent weeks. While a rise in the dollar index normally puts pressure on risky assets, it was noted that despite the US dollar reaching an 18-month high, Bitcoin has maintained its upward trend over the past five or six weeks. The fact that Bitcoin remained above its 50-week moving average while gold fell below it reinforced the view that the cryptocurrency has recently been behaving differently than a classic risk asset.
Howell also believes that a rally in the bond market could be a significant catalyst for Bitcoin. Noting that US Treasury bonds are one of the fundamental collaterals in the global financial system, the strategist stated that if bond prices rise and bond volatility decreases, the collateral multiplier will strengthen, injecting more liquidity into the financial system. According to Howell, in such a scenario, Bitcoin could also be expected to rise.
Dave Weisberger similarly stated that Bitcoin reacts to perceived monetary expansion and liquidity inflows with an extremely high beta. Weisberger argued that a strong bond rally could emerge if economic growth slows, bringing with it expectations of further monetary expansion. He said it would be difficult for him to expect Bitcoin not to benefit from such a global bond rally.
Mike McGlone, however, painted a more cautious picture. Arguing that risky assets, including Bitcoin and gold, are still significantly tied to the US stock market, McGlone stated that taking positions against the Fed at current levels carries serious risk. Suggesting that Bitcoin has shown similar performance with much higher volatility in the long term compared to the Nasdaq, McGlone believes that the true resilience of cryptocurrency will only be tested if a significant correction occurs in the S&P 500.
*This is not investment advice.
