How economic outcomes cause bitcoin outcomes
Is a stock market rally positive for bitcoin? What about a housing market crash?
Dear Readers,
As a bitcoin research firm, constant macroeconomic analysis is conducted because bitcoin represents a mirror for the legacy system. Why bitcoin goes up and down in the short term is driven by many idiosyncratic factors, including the direction of the stock market. But on a longer-term basis, we believe bitcoin increases in value due to the understanding that further money creation by governments and central banks is inevitable.
For this reason, every time we sense a money creation policy response, the whole case for bitcoin to occupy the portfolio theoretically increases. One might isolate our letter today on US residential real estate and think: 1) home prices decline, 2) the economy goes into recession, 3) stocks go down, and 4) bitcoin goes down. We, on the other hand, think something more like: 1) home prices decline, 2) Congress moves to shore up Fannie/Freddie, and the Fed becomes unable to exit the mortgage-backed securities market, 3) fiscal and monetary accommodation set the government on a path to higher deficits and the Fed to expand its balance sheet, and 4) investors around the world rush to bitcoin in response.
Individual economic outcomes each cause short-term market movements, as a change in conditions can affect yields and trickle into every asset class. They also affect the long-term path, and most notably in terms of problems in the financial system, boosting the global case for bitcoin as a non-banking, non-government instrument. In summary, there are many things that worry us about the economy, but most of them end up favorable for the digital asset with mathematically precise and energy-bound scarcity.
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Today’s topics
A theme of balancing economic outcomes with bitcoin outcomes will appear throughout today’s letter.
US residential housing is showing early signs of distress, a quiet brewing.
What exactly is on Jerome Powell’s mind? We can tell you.
Bitcoin experiences a frightening dip. We’ll show you the technicals.
Bond bubble bursters have shifted eyes to Japan, largely because the US Treasury market is trading quite well.
Japan devalues. My thoughts on China and the dollar broadly.
