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Bitcoin has risen for three reasons, and investors are increasingly considering seeking hedging in Bitcoin.
The economist Raoul Pal said that as the US and other countries tried to boost economic growth by cutting interest rates, investors began pouring in gold, cash, government bonds and bitcoin as hedging instruments.
Pal warned that he is currently at the most important moment in his foreign exchange market for his 30-year career. The dollar seems to face an uncontrolled risk of appreciation.
Pal pointed out that the Fed's generalized trade-weighted US dollar index is close to 130 and is on the verge of breaking through a huge cup-shaped pattern.
At the same time, the ADXY (Asian Dollar) index is about to fall below the key trend line.
JPMorgan’s emerging market currency index is also underperforming and is about to fall to a new low.
Pal pointed out that at least seven other legal tender currencies are also depreciating, and the conclusion is that a stronger US dollar is triggering a massive wave of global deflation, which could lead to a financial crisis. However, the optimistic side is that this may be very beneficial for bitcoin prices.
As central banks show that they will continue to loosen monetary policy, investors are becoming more and more nervous. Later, the Fed announced a rate cut of 25 basis points.
According to the latest data from SFOX, Bitcoin has the lowest correlation with traditional markets.
Just recently, the Bank of Thailand cut interest rates by 25 basis points, the first time since 2015. The New Zealand central bank also cut 50 basis points, which surprised many investors.
In addition, the Bank of India also cut interest rates by 35 basis points.
It is worth noting that John M. A chart published by Spallanzani shows that in the past few years, the interest rate of the Bank of India seems to be inversely related to the price of Bitcoin.
Interestingly, in the past few years, the rate hike seems to coincide with the bottom of the bitcoin price, and vice versa.
3, Bitcoin can provide asymmetric returns
Other analysts also believe that bitcoin is increasingly appearing in the attention of investors looking for alternative safe-haven assets. Wx:CY-52520
For example, in an interview earlier this week, Morgan Creek Digital co-founder Anthony Pompliano discussed how Bitcoin will respond to current global monetary easing trends.
Pompliano believes that more and more organizations are starting to focus on Bitcoin because it "has been proven to be irrelevant and provides asymmetrical returns compared to traditional assets."
At the same time, Fundstrat's research director Tom Lee believes that Bitcoin has been decoupled from the strong dollar, and the strong dollar is the reason for the sharp fall in bitcoin prices in 2018. Bitcoin is "negatively associated with the stock market."
As a result, bitcoin is increasingly associated with gold, and its performance in 2019 is significantly better than precious metals, traditional stocks and almost all assets.
Lee said that this trend may accelerate as investors seek safe haven for traditional stocks. The Fed’s recent interest rate cuts will have a positive impact on bitcoin prices. Bitcoin is increasingly becoming a macro hedging tool for investors to guard against possible problems. Liquidity is driving capital into all of these risky assets and hedging, which helps bitcoin rise. At this rate, Bitcoin can easily break through its historical highs.
Raoul Pal is Not Alone. Other analysts seem to be bullish as well. A lesser-known trader by the username also shared Raoul Pal’s “prediction.” of Bitcoin to 1 million in 2025, based on a logarithmic growth model but considering 4-year cycles with more strength than Raoul’s method. Raoul Pal ist ein ehemaliger Mitarbeiter der weltweit bekannten Bank Goldman Sachs. Dabei hat er in den letzten 12 Monaten einer Wandlung durchlebt, die man sprichwörtlich als ‚vom Saulus zum Paulus‘ bezeichnen kann. Denn Pal entwickelte sich im vergangenen Jahr immer mehr zu einem Bitcoin Bullen, der von Interview zu Interview optimistischer gegenüber BTC wurde. Dabei spricht er auf ... Raoul Pal: It’s good to be here. Stephan Livera: Raoul. You’ve been commenting a lot on Bitcoin and the last time we chat and we had a chat was about almost a year, about a year ago. So I’d love to get your thoughts. Where are you? What’s updated in your thinking around Bitcoin over that time? Raoul Pal: Well, quite a lot’s happened ... Global Macro Investor CEO Raoul Pal has explained why he believes bitcoin is better than gold in every way. He proclaims that bitcoin is "the hardest form of money" and "the best reserve asset and ... In a recent interview with Daniela Cambone, former hedge fund manager Raoul Pal said that bitcoin could reach $1 million in the next five years.
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