The Federal Reserve, US Secretary of Treasury, and more, will all tell you the same thing: inflation is under control and is nothing to worry about. Which often suggests the exact opposite is happening, much like when the government first told the world lockdowns would last only two or so weeks back in April 2020.
Inflation talk has caused Bitcoin to revisit resistance and set a new all-time high, oil and natural gas prices to reach highs not seen in years, and much more. But what hasn’t quite moved, has been precious metals.
Could cryptocurrencies like Bitcoin have taken the luster and appeal from precious metals? We’re digging into why metals have gone stagnant during a time when they are best positioned to shine.
Discussion around the term hyperinflation has never been higher, recently being brought back into the spotlight by Twitter and Square Inc. CEO Jack Dorsey. Dorsey tweeted on the platform he created, that “hyperinflation is going to change everything.” Adding that “it’s happening.”
Dorsey is an outspoken proponent of Bitcoin, claiming it could someday become the global reserve currency for the internet. His company Square purchased BTC as part of its corporate treasury strategy, which highlights his concerns over hyperinflation.
If hyperinflation is indeed here or on its way, as Dorsey suggests, he could be a leader in helping other businesses survive whatever is to come that will “change everything” as he so boldly predicts. Other companies, like the Michael Saylor-led MicroStrategy, or Elon Musk’s Tesla have also purchased BTC for such strategic financial reasons.
Thus far, such decisions have paid off, with the BTC they bought handsomely outperforming the dollar as a corporate reserve asset.
Bitcoin has taken the spotlight over the last year since the pandemic first struck. The digital-only currency has finally become mainstream, especially during a time when the government appears to be losing control over monetary policy, which is what is fueling the hyperinflation that’s taking hold.
The reason companies like Tesla, MicroStrategy, and Square have added BTC to their bottoms lines was not to bolster earnings – even though it did have that effect – but to protect company value in the macro climate they saw coming a mile away. These thought leaders are sharper than the current politicians, and realized the unprecedented fiscal stimulus would have a disastrous impact on supply and demand.
The entire economy has been disrupted, creating a situation where demand greatly outweighs the already constricted supply. With a holiday season coming and supply shock narrative everywhere – including crypto – things could turn into mania quickly surrounding Bitcoin.
Bitcoin has been known to bubble every four years, following each hard-coded halving. The cryptocurrency’s cycle could come to a climax at prices much higher than here, which could push Bitcoin far beyond its fair market value.
Currently, the market has been bullish on Bitcoin and cryptocurrencies, and much of that has come at the expense of gold market outflows. Even the Bitcoin ETF that recently launched beat the previous record holder on its way to $1 billion in trading volume, which was held by a gold ETF.
These days, it is hard to deny that Bitcoin beats gold at its own game. It can be moved and stored for a fraction of the cost, cannot be counterfeited, and more, among other benefits the cryptocurrency offers over metals.
What Bitcoin lacks, however, is the same history as gold, and the same level of liquidity and capital. At more than $10 trillion in capital compared to Bitcoin’s $1 trillion, gold trades at a much more stable price. Bitcoin is also only starting to get over the hump of being a speculative asset, while gold has been widely accepted for centuries as a currency, a store of value, and a monetary standard.
Because of hyperinflation, Bitcoin’s bubble could become bigger than ever thought possible. But all bubbles eventually pop. Where the capital will flow, is likely back into precious metals, which aren’t stagnant, but are in a full-scale accumulation phase.
The emergence of cryptocurrencies that trade in an always-on, 24/7 digital marketplace, has changed the perception of how market cycles should work. Bitcoin, as we’ve explained, has always boomed and busted based on the four-year halving cycle. When demand is high, the supply is slashed in half causing a supply shock that drives up prices. Then it all comes crashing down and the cycle restarts again.
In gold, however, the last bull market peak was in 2011, just as The Great Recession was coming to an end. The asset then began an eight year long bear market. Last year, after the onset of the pandemic, gold reached a new all-time high, and then took pause. As outlined, this was much due to Bitcoin stealing gold’s thunder.
That capital will eventually rotate back into gold, as the economic climate makes cryptocurrencies a risky pursuit for the time being. At that point, gold and other metals could begin their next wave higher. Analysts are already calling for targets closer to $5,000 and expect it to happen in a flash after so much consolidation and base building at this level.
Gold and other metals and commodities like oil and natural gas are only a small portion of the assets available for trading at the award-winning trading platform, PrimeXBT. The lineup also includes Bitcoin, Ethereum, and other cryptocurrencies; the Dow Jones, S&P 500 and more stock indices; and major forex currencies, cross pairs, and more.
Using built-in charting tools, users can best strategize on how to trade gold for the most possible profit. The same tools can help to predict the top in Bitcoin, which could be a sign that capital is about to flow back into metals, and the last leg up of the precious metal bull run will begin.
It is during the final leg up in gold that silver tends to awaken, and rises even more rapidly than the gold standard itself. Of course, anything is possible, and it could be too late for metals. Bitcoin and Ethereum and others could have already ushered in a new standard – one that is for the digital era.