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Bitcoin could continue playing its global safe-haven hedge role as a Wall Street veteran blasts off Jerome Powell and his pro-inflation policies in his latest opinion editorial.
The benchmark cryptocurrency could rise as Andrew Parlin, founder/chief investment officer at Washington Peak Investment Advisors in New Jersey, warns about how the Federal Reserve chairman has thought it all wrong when he expects to contain inflation near the central bank’s preferred 2 percent target.
That becomes more difficult as Mr. Powell vows to keep interest rates near zero and continue buying government and corporate debts at the rate of $1.4 trillion per year until 2024.
“If this policy stance seems incongruous, that’s because it is,” noted Mr. Parlin.
Past performance is no guarantee of future results
A Modest Hyperinflation Ahead?
The investment advisor called out Mr. Powell’s extended dovish outlook as a wholly asymmetrical monetary experiment. To him, the Fed’s loose policy could cause incalculable losses through an “entrenched inflation” that the US has not seen in decades.
“Given how inflated asset prices are, the bust that would follow would probably be unusually severe and protracted,” Mr. Parlin added. The finance veteran further stated that Mr. Powell’s blithe dismissal of inflation risks arise from lower consumer prices since the 2008 collapse.
The 10-year break-even rate, a measure of inflation expectations, surged to 2.3 percent. Source: FRED/T10YIE on TradingView.com
He found the fractal irrelevant if put in post-pandemic conditions, especially when one looks at the US government’s heightened stimulus packages in the previous 12 months, which is about five times the amount of fiscal spending pointed at the recession of 2008-2009.
“Common sense suggests the risk of a mighty boost to inflation, far above the Fed’s 2.4 percent projection for 2021,” Mr. Parlin stated.
Bitcoin…
…rose by more than 1,500 percent from its March 2020’s nadir of $3,858 at one point in time.
Investors flocked to the cryptocurrency, believing that it would serve as an insurance asset against rising consumer price indexes. The narrative was straightforward: Bitcoin has a limited supply cap of 21 million tokens while the US dollar, a global store-of-value, comes with an infinite supply. A gold-like scarcity makes Bitcoin an alternative hedge for parking value.
“In a world where you’ve got $90 trillion worth of equity market cap, and God knows how many trillions of fiat currency, etcetera…it’s the wrong market cap, for instance, relative to gold, which is $8 or $9 trillion,” billionaire investor Paul Tudor Jones told Yahoo Finance in an interview last year. Bitcoin was trading just shy of $20,000 back then.
Past performance is no guarantee of future results
The cryptocurrency rose three times into 2021, logging a new record high above $61,000 in mid-March. Again, Bitcoin’s growth accelerated after corporates, including Tesla, MicroStrategy, and Square, added billions of dollars worth of BTC into their balance sheets.
Bitcoin is trading 1,347 percent up from its March 2020 low. Source: BTCUSD on TradingView.com
Tesla also started accepting bitcoin as payments for its electric vehicles, legitimizing the cryptocurrency as a futuristic store of value asset.
The inflation alarm has started already, much in line with what Mr. Parlin warned about. On Sunday, the Financial Times reported that many US companies have alerted about rising business costs, showing the first types of inflation flickers. Bitcoin is trading just above $56,000 at press time.
Photo by Bermix Studio on Unsplash
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