Step One: Bitcoin Investors Healthy As Federal Reserve Cheers Inflation, Price Near $ 11,000

One of the interesting things about cryptocurrency investors is that they really see the world very differently than many of their counterparts in traditional finance.

It thinks something like this: Efforts by governments and central banks to repair the economy are doomed and are likely to make the situation worse. There is no point in moving to a defensive investment strategy as the prices of digital assets are soaring to the moon. Every time the stock market rises, it only confirms the fact that the dollar is being devalued by trillions of dollars of central bank money printing.

Dan Morehead, a former Wall Street trader and hedge fund manager who now runs cryptocurrency-focused investment firm Pantera Capital in the San Francisco area, arrived Monday.

In a monthly letter, Morehead discussed how central banks usually succeed in deliberately trying to raise inflation now that the Federal Reserve has official policies. He cited Venezuela and Zimbabwe as two previous success stories.

Morehead then turned to the argument that asset prices “are rising not because stock fundamentals have improved” but because “a huge wave of money is being printed.”

“Gold is at a 5,000-year high,” wrote Morehead. “In other words, paper money is at an all-time low.”

Gold prices in dollars per ounce, reverse scale.

Source: TradingView

It is this counter-intuitive perspective that is sometimes refreshing, also because the crypto investor is always right. Wall Street audiences and society in general are now becoming more receptive to the idea that the traditional financial system and economy are both unsustainable and unfair.

The Fed’s senior monetary officials are meeting this week to discuss their next steps to heal the US economy, which at this point appears to be doing nothing for the next several years until inflation is above the historic 2% target the central bank rises and stays above that level for a while.

As reported by First Mover Monday, it is possible that the Fed’s next move will come when the stock market takes a fresh leap and prompts the central bank to step in and pump more money into the economy to keep the markets running smoothly.

Jeff Dorman, another former Wall Street veteran who is now the chief investment officer of the cryptocurrency-focused investment Arca Fund in Los Angeles, wrote in his weekly column Monday that Congress bogged down over a new coronavirus-related stimulus package is, this could also be prone to a similar dynamic of doing nothing until you have something to do.

He has written in the past that “it would probably take a tantrum before Congress acts,” and this week he wrote, “Methinks Congress will act soon.”

“Moral Hazard never went away, but it’s definitely back,” said Dorman.

What makes the difference for the crypto investors to be sensible, and not the other way around, is that market signals are currently validating the crypto investment thesis.

Bill Gross, the legendary former Pimco Bond Fund manager, is encouraging investors to take a defensive stance because “there is little money to be made almost anywhere in the world,” CNBC reported on Monday.

Say the Morehead from Pantera, whose digital asset fund has returned 168% so far this year, according to the letter.

According to Morehead, Bitcoin and other cryptocurrencies are winning because they have a relatively fixed supply, similar to gold, and “improved usage / fundamentals,” similar to technology stocks like Amazon and Netflix.

Simply compare the following chart of the performance of Pantera’s asset classes since the beginning of the year:

To this one from Goldman Sachs (postponed a few days so the percentages are a little different):

One contains crypto and rises to 244%; The other does not contain crypto and increases to 29%. So far, it turned out that the smart money this year, based on previous track record, was in crypto.

Bitcoin Watch

Bitcoin daily chart.

Source: TradingView

Bitcoin is looking north after breaking a 10-day sideways trend with a move above $ 10,500 on Monday.

The optimistic developments in the main technical indicators support the area breakout. For example, the 14-day relative strength index breached a declining trendline, signaling an end to the price decline from the August high of $ 12,476.

Additionally, the MACD histogram, an indicator used to measure trend strength and trend changes, has passed zero, indicating a bullish reversal.

Hence, resistance levels at $ 11,000 and $ 11,200 could come into play soon. According to analysts, however, the cryptocurrency remains vulnerable to a possible sell-off in the stock markets.

“Previous sell-offs were exacerbated by the risk-off dynamic in stocks, especially the tech-heavy Nasdaq index,” Matthew Dibb, co-founder and COO of Stack Fund, told CoinDesk in a WhatsApp chat. “We remain cautiously optimistic this week.”

Read more: Analyst ‘cautiously bullish’ on Bitcoin but says stock sell-off is still a threat

Token Watch

BZx (BZRX): The DeFi loan project recovers $ 8 million cryptocurrency from an attacker who took advantage of the code flaw.

Aave (LEND), Yearn.Finance (YFI), connection (COMP), Synthetix (SNX), MakerDAO (MKR), REN (REN), Kyber Network (KNC), Loopring (LRC), Balancer (BAL), Augur ( REP): The new 10-token DeFi impulse index offers traders the opportunity to “get involved in DeFi without having to buy each token individually”.

Tether (USDT), Tron (TRX), Ethereum (ETH): Tether is moving 1B of its dollar-linked USDT stablecoins from Tron to the Ethereum blockchain.

What is hot?

Bitcoin mining computer maker Bitmain opens a new chapter in the battle between the co-founders when Jihan Wu gains the upper hand (CoinDesk).

While the Swiss companies SEBA, Sygnum and Bitcoin Suisse are investigating the development of a digital franc, “interoperability” is becoming the new buzzword (CoinDesk).

Thailand uses a blockchain-enabled platform to sell government bonds worth $ 1.6 billion (CoinDesk).

Peer-to-Peer Bitcoin Exchange Paxful Leaves Venezuela Citing “Ever Stricter” Regulations (CoinDesk)

The Bitcoin blockchain consumes as much electricity as the Czech Republic, more than Switzerland, Kuwait or Algeria (decrypt)

The Japanese cryptocurrency exchange is suing Binance, claiming it helped launder some of the funds stolen in a $ 60 million hack in 2018 (CoinDesk).


The latest on economics and traditional finance

For the first time, the volume of trading in single stock options exceeds the volume of ordinary shares (WSJ).

Taxi medallion lender is forgiving $ 70 million in debt caused by the New York City (WSJ) closure.

Economists warn of U.S. wasteland with no incentive to engage in bipartisan support (Financial Times)

The proposal to add government ministers to the board of the Bank of Indonesia after a $ 27 billion bond purchase could mark a new era of erosion in central bank independence (Nikkei Asian Review).

Indian stocks rise after inflation data; Small, mid-caps extend profits (Reuters)

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