First Mover: Bitcoin Investors the Sane Ones As Federal Reserve Cheers Inflation, Price Closes to $ 11K

One of the cool things about cryptocurrency investors is that they really look at the world very differently from many of their traditional finance counterparts.

The thinking goes something like this: The efforts of governments and central banks to repair the economy are doomed to fail and likely to worsen the situation. There is no point in switching to a defensive investment strategy because prices for digital assets are going to the moon. Whenever the stock market goes up, it simply validates the reality that the dollar is being degraded by trillions of dollars of central bank money printing.

The latest logic-flipping zinger came Monday from Dan Morehead, a former Wall Street trader and hedge fund executive who now heads cryptocurrency-focused investment firm Pantera Capital in the San Francisco area.

In a monthly letter, Morehead discussed how central banks typically succeed when they try keenly to raise inflation, as the Federal Reserve is now pursuing it as official policy. He cited Venezuela and Zimbabwe as two previous success stories, so to speak.

Morehead then focused on the argument that asset prices “are not rising because equity fundamentals have improved”, but because “a huge wave of money is printing.”

“Gold has peaked in 5,000 years,” Morehead wrote. “Or, put it another way, paper money is at an all-time low.”

It’s that counterintuitive, “another way” perspective that can seem refreshing at times, in part because the crypto investor keeps proving they’re right. The public on both Wall Street and in wider society is now becoming more receptive to the idea that the traditional financial system and economy are both unsustainable and unfair.

The Federal Reserve’s top monetary officials are meeting this week to discuss their next steps in healing the U.S. economy, which at this point appears to be doing nothing for the next few years until inflation surpasses the historic target of the US economy. 2% of the central bank and remains above that. level for a while.

As First Mover reported on Monday, it’s possible the Fed’s next move will happen if the stock market plunges again, prompting the central bank to step in and pump more money into the economy to keep markets running smoothly.

Jeff Dorman, another former Wall Street veteran who is now the Los Angeles Arca Funds chief investment officer for cryptocurrency-focused investments, wrote in his weekly column on Monday that Congress, which was stuck on a new stimulus package. related to the coronavirus, it could also be prone to a similar dynamic of doing nothing until you have to.

In the past he wrote that “it would probably take a whim of fairness before Congress takes action” and wrote this week, “I believe Congress will act soon.”

“Moral hazard has never gone away, but it has definitely returned,” according to Dorman.

What points the balance towards crypto investors who are sane and not the other way around is that market signals are currently validating the crypto investing thesis.

Bill Gross, the legendary former Pimco bond fund manager, encourages investors to get defensive because “there is little money to be made almost anywhere in the world,” CNBC reported Monday.

Tell that to Pantera’s Morehead, whose Digital Asset Fund has returned 168% so far this year, according to the letter.

Morehead said bitcoin and other cryptocurrencies are winning because they have a relatively fixed supply, similar to gold, and “improved usage / fundamentals,” similar to tech stocks like Amazon and Netflix.

Just compare the following chart of asset class YTD performance to Pantera:

To this from Goldman Sachs (shut down for a few days so the percentages are slightly different):

One includes encryption and goes up to 244%; the other does not include encryption and goes up to 29%. So far this year, based on the track record so far, it turns out that smart money was in cryptocurrency.

Bitcoin is looking north, having breached a 10-day side trend with a move above $ 10,500 on Monday.

The bullish developments on the key technical indicators confirm the range breakout. For example, the 14-day Relative Strength Index breached a descending trend line, signaling the end of the price pullback from the August high of $ 12,476.

Additionally, the MACD histogram, an indicator used to measure strength and trend changes, crossed above zero, indicating a bullish reversal.

Therefore, the resistance levels at $ 11,000 and $ 11,200 may soon come into play. That said, the cryptocurrency remains vulnerable to a potential sell-off in equity markets, according to analysts.

“Previous sell-offs have been exacerbated by the risk momentum in stocks, especially the high-tech Nasdaq index,” Matthew Dibb, co-founder and COO of Stack Fund, told CoinDesk in a WhatsApp chat. “We remain cautiously bullish this week.”

Read More: ‘Cautiously Bullish’ Bitcoin Analyst But Says Stock Selling Is Still a Threat

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