Taps Coogan – May 19th, 2021

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Back in April, I noted the following while commenting on a Nassim Taleb interview:

If Bitcoin was measuring the risk for the inflation induced loss of fiat purchasing power, it would presumably track changes in real long term treasury rates, just like gold does. If the inflation adjusted yield on ‘risk free’ treasuries go up, all things being equal, the value of a non-yielding non-fiat monetary asset should go down and that’s exactly what tends to happen with Gold.

While some have pointed to Bitcoin’s recent outperformance of Gold as evidence that the latter has started to fail in its role as the primary non-yielding, non-fiat reserve asset, the opposite is true. Gold is doing what it is ‘supposed’ to do. Get worried about Gold’s role in finance when it stops tracking risk-free inflation adjusted long term yields (or start worrying about your ‘risk free’ and ‘inflation adjusted’ benchmark).

Bitcoin’s meteoric rise over the last six months means that it is measuring something other than fiat debasement or inflation fears. That something certainly seems to be the excessive stimulative ‘juice’ washing over financial markets and society at large.

Looking for a peak in bubblelicious market euphoria? Keep an eye on Bitcoin.

Well, here you go:

Bitcoin

Bitcoin has declined nearly 40% over the past month and is now resting on its January 2021 high. Presumably, it’s due for a bounce, but unless it claims a new high, this mania has lost its mojo.

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