As I write this on Friday morning, bitcoin is up 1.78% to $11,178. Ethereum is up even more over the last 24 hours — 7.96% to $343 (nice call on ETH last week Vin!). Other altcoins are a mixed bag, but the majority are green on the day.
And crypto isn’t the only alternative asset class that’s gaining today. Gold is up 0.73% to $1,982 per ounce and silver is up 2.99% to $24.06 per ounce.
I believe what we’re seeing is a “flight to alternative safety.” Usually, wealthy investors sought government bonds in times of chaos because they were viewed as a safe haven asset. But they don’t look very safe these days. U.S. government bonds currently pay a negative yield once you factor in inflation.
Stocks have been doing well since their March lows, but they remain expensive and overbought. So where is cash supposed to go?
My guess is more money will continue to flow into alternative “hard assets” like gold, silver and bitcoin.
The next 5-to-10 years are certainly going to be interesting. We’re active participants in the largest monetary experiment in history. We are going to see what happens when the world’s largest economy (the U.S.) prints unprecedented amounts of money — which also happens to be the world’s reserve currency
My guess is this strategy (Modern Monetary Theory, essentially) will work pretty well for a while. There’s still a lot of demand in the world for dollars. The fact that we’re printing so much to pay our bills won’t be a big deal at first.
But eventually the U.S. will lose the “privilege” of issuing the world’s reserve currency. This is no longer a “conspiracy theory.” It’s now being predicted by Goldman Sachs. Here’s an excerpt from The Hill’s story on Goldman’s report:
A record high price for gold, known as the currency of last resort, is raising questions about the U.S. dollar’s future as the world’s reserve currency, according to a Goldman Sachs research note published Tuesday.
The commodity, which tends to see increased demand during economic uncertainty, reached an unprecedented price of $1,943 an ounce this week, in part because of record-low interest rates that Goldman Sachs analysts said may demonstrate a stronger appetite for inflation at the Federal Reserve.
“Combined with a record level of debt accumulation by the US government, real concerns around the longevity of the US dollar as a reserve currency have started to emerge,” the analysts wrote.
So we’re finally to the point where big investment banks are openly discussing the possible fall of the dollar. Like I said earlier, it should be an interesting next 5-to-10 years.
In case there was any doubt, I continue to favor gold, silver, miners, bitcoin, emerging market stocks and high quality startup opportunities as alternative investments.
Also, I will be watching altcoins closely over the coming months. It’s possible that we see a 2017-like mania again sometime in the near future. The Fed is going to encourage some crazy risk-taking behavior. And some of that fervor could end up in the altcoin market.