Ex-Bridgewater Analyst: Yes, Bitcoin Is A Giant Bubble… But The Global Fiat System Is An Even Bigger Bubble
Bitcoin prices peaked and fell 85% within a year.
It seems Bitcoin is back. It is believed that we are in the midst of another bubble.
Bitcoin in its current form is not a viable candidate as a currency replacement.
If we measured the US annual inflation in Bitcoin instead of dollars, you’d have seen 275% inflation in 2018, -50% deflation in 2019, -75% deflation in 2020.
A healthy society cannot function with that kind of price volatility.
The currency must be stable enough that if you get paid on Friday you know what kind of dinner you can buy on Sunday. While it may mature in the future, Bitcoin as it exists is largely a speculative asset.
. If 2021 turns out like 2020, the market cap of Bitcoin would be greater than all US currency in circulation.
The global fiat system is itself in an even bigger bubble.
Investors are forced to hold $18 trillion of negative yielding debt while $trillions are being printed all around the world.
Investors are drowning and are grabbing onto cryptocurrencies as a lifeline.
In the short-term, there is still a lot of dry powder from stimulus checks and some institutions are also making the leap into the crypto space. So this Bitcoin party could continue as long as rates remain low and the printing press hot.
As long as the world is flooded with money and safe assets offer poor compensation, Bitcoin will be relevant.