Will Bitcoin be part of the Everything Bubble?
In the last month, the FED has added roughly $210 billion to their balance sheet.
A number that is larger than the entire market cap of bitcoin by the way, which stands just under $150 billion currently.
They are quick not to call this latest round of balance sheet expansion quantitative easing, but I am not sure what you call it exactly as it looks an awful lot like the same thing.
The result is a FED balance sheet that is now approaching $4T:
(Source: https://steemit.com/bitcoin/@jrcornel/btc-bounces-as-fed-expands-balance-sheet)
The perfect storm for asset prices?
Many investors and analysts around the world are suspecting that as moves like this one continue to happen, asset prices will continue to move higher.
Since assets across the board are likely to rise, the current and expected bubble is being referred to as the "Everything Bubble".
To make matters worse, many countries around the world are doing this exact same thing.
It has become the norm for central bank monetary policy.
Which means this bubble could be worse than anything the world has ever seen before as economies and assets are becoming more and more intertwined and connected.
Will bitcoin go along for the ride?
My guess is yes.
As it stands now, bitcoin's use cases are relatively small, similar to that of gold.
The majority of the money in bitcoin is in it due to its store of value properties or its speculative properties, which ironically don't usually go hand in hand.
If assets across the board inflate, I would expect the price of bitcoin to do the same.
Due to the price moves we saw in 2017, everyone is keeping a close eye on bitcoin to see if it can catch some momentum again, at which point they will be quick to jump in as they know how explosive the gains can be.
Bitcoin is considered to be very far right on the risky asset spectrum by most managers.
However, what happens when the bubble pops?
Will that tank the price of bitcoin?
Perhaps, or perhaps not.
I think that depends on how bad the prick is that pops the bubble, and I think it matters how far down the road it happens.
If the prick is due to central banks losing control and many countries experiencing run away inflation, I don't think bitcoin goes down much in that scenario.
I think it would be seen as the Schmuck Insurance many out there claim that it is.
However, if we have more of a run of the mill garden variety pullback/recession, then I think you could see bitcoin prices pulling back in that environment right along with most other asset classes.
There are several moving parts to all of this so it is difficult to say with absolute certainty how assets will respond, but the most likely outcome with continued money printing is increasing asset prices.
And I am thinking that will likely include bitcoin.
Stay informed my friends.
-Doc