Bitcoin, Bonds & Inflation
Talk of inflation is everywhere. Earlier this week, Treasury Secretary Janet Yellen said on Saturday inflation could climb as high as 3% this year as the economy recovers from the depths of the coronavirus recession. But the Federal Reserve has promised to keep interest rates low through the end of 2022 and plans on continuing its money-printing policy in hopes of boosting the stock market.
The Fed is of the opinion that any spikes in inflation are transitory and don’t warrant a change in policy to combat it.
Some investors are starting to disagree, including Ray Dalio. As our Weiss Crypto Sunday Special host Chris Coney explains, when inflation rises, investors look to park capital in safe havens. Traditionally, that meant gold and bonds. But with current interest rates, inflation above 5% would mean investors would lose value if they parked their capital in bonds.
The inflation rate year over year as of the end of May is 5%.
According to Chris, “That’s probably why Ray Dalio has turned to Bitcoin (BTC, Tech/Adoption Grade “A-”) and why he would rather hold it than a bond. As long as Bitcoin outperforms basic price inflation, you’re better off holding Bitcoin despite all the volatility in the long run.”
Weiss crypto analyst Alex Benfield weighs in as well: “I would say almost every year, Bitcoin’s existence has returned more than a 5% return. So, the likelihood that it outperforms inflation is pretty high, especially when you’re considering a two or three-year hold.”
In this timely discussion, Alex and Chris cover:
• The real risk of inflation for Wall Street investors vs. retail investors.
• Bitcoin’s position as a store-of-value safe haven.
• Whether custodians can handle an influx of new investors fleeing inflation fears.
This week’s Weiss Crypto Sunday Special is especially timely and important. I highly recommend you watch it now.