6 ms·

If inflation's so bad, why are gold and Bitcoin not posting massive gains?

by csense 4y ago

fallingfrog 4y ago
Those are just vehicles for speculation like everything else.
danuker 4y ago
Because people are selling investments to buy food and fuel. If you want short-term inflation protection, add some commodities to your portfolio.
- jollybean 4y ago
  No, they are selling BTC because markets are crashing, they need the cash for other things. BTC will trend perfectly inline with stock valuations as a function of excess liquidity, kind of indicating they are not what they are supposed to be. They are a fun speculative instrument, when things get tough, people stop pretending and move onto other things. That may change, but unlikely. I see a future crypto 'mapped' to the real world in the future some how, not fully but only partically decentralized, that could work.
  - PKop 4y ago
    >No, He said virtually the same as you..
    - jollybean 4y ago
      People are not getting out of crypto to pay for milk and bread, they are getting out because it's falling and they want to put their money in other things. I said 'pay' I meant to say 'invest'. BTC should be counter cyclical to stocks, but my bet is that they won't be. It'll be up during 'fun times' and down during 'scary times' whereas by design it should be the opposite. That could change if something about BTC becomes institutionalized, i.e. everywhere starts accepting BTC for Oil or something but I doubt that will happen.
      - danuker 4y ago
        Well, they are certainly not moving to stocks. How long are they going to wait until reinvesting their cash, with inflation at 8.6% per year?
        jollybean 4y ago
        Yes, you're right, I'm lazy in my thinking. Probably not stocks, but maybe actually some value stocks. My point is just that BTC is not a safe haven from stocks.
  - mattwilsonn888 4y ago
    People always wonder when Bitcoin will decouple from the stock market, but the real odd phenomenon has been the use of stocks to escape inflation.
    - rightbyte 4y ago
      Why is that odd? All these record profits surely are due to inflation? Which ends up in stock value?
      - mattwilsonn888 4y ago
        It's not an IQ test - its just odd. The de facto reason to buy stocks is to invest in production - not to escape inflation in a pure sense.
- programmarchy 4y ago
  Additionally, as whales exit their positions, they will be sitting on a mountain of cash ready to buy real assets in a fire sale once the bubble pops.
deltree7 4y ago
because there is no natural law that says Gold/Bitcoin will do well during inflation. Like all non-cash generating assets, it is driven by supply/demand and speculation (nothing to do with inflation protection) It is the snakeoil people who promised that and gullible idiots believed/memed/tiktoked that.
- mattwilsonn888 4y ago
  Inflation is a money supply issue, especially right now - money supply is directly relevant to inflation and hard assets. The reason these assets are not up is because the Fed is threatening huge constrictions to the supply of money which people are currently believing.
  - deltree7 4y ago
    Wrong! A plot of land in rural Arkansas has been stable irrespective of Money Supply. The value of grain of sand on the beaches of South Carolina have been same. OTOH, Bitcoin is not an hard asset :) Hard/Soft classification are used by naive doomer-preppers (aka Peter Schiff). Assets are things that produce cash flow, rest is speculative. That's why the beanie baby (a "hard asset") that you bought in 1999 hasn't beaten inflation
    - mattwilsonn888 4y ago
      Assets are not "things that produce cash flow." They are simply property which has expected future value. You seem to be inebriated.
    - danuker 4y ago
      How do you count cash flow? Nominal? Or inflation-adjusted? If nominal, Venezuelan bolívars are the way to go. If inflation-adjusted, maybe you're on to something, but still depends how you measure inflation.
PKop 4y ago
Because the Fed is planning on raising rates and initiating QT for multiple months ahead, and they expect these actions to tighten monetary conditions and lower asset prices. If Fed actually does do this for a sustained period of time, everything but the dollar will be crushed, even US treasuries. It would be the polar opposite of printer go brrr.... maybe, vacuum go vrooom, sucking up all the liquidity and decreasing the money supply. If QE/rock bottom rates = everything bubble, the opposite would mean.... pop. At some point if/when this course of action becomes untenable due to recession/unemployment/too high interest rates given amount of debt in economy, and Fed reverses course (which they did much earlier last tightening cycle in 2018 when markets tanked), those two assets should rise again. Gold particularly falls when real interest rates rise. But, it is likely they are more serious about taking assets down and essentially inducing a recession given the persistent high inflation. The result of fighting that to any real degree means everything keeps going down...which is literally their goal (the reverse wealth affect to slow inflation).
- legutierr 4y ago
  > At some point if/when this course of action becomes untenable due to recession/unemployment/too high interest rates given amount of debt in economy, and Fed reverses course (which they did much earlier last tightening cycle in 2018 when markets tanked), those two assets should rise again. Right now unemployment is under 4%. The Fed has a lot of leeway to raise rates before what they are doing affects employment, and I'm not sure at all that they will allow unemployment to get too high, if they can help it.
gman2093 4y ago
You can't eat gold or bitcoins.
matwood 4y ago
Assets tend to correlate in volatile markets. There are plenty of papers discussing this effect. Because of diversification, people often need to sell higher performing assets to cover lowering performing ones. A friend ran a successful small investment fund, and still went out of business during the last down turn because all his clients had to pull their money out to cover losses elsewhere.
cmrdporcupine 4y ago
Jamie Dimon: "The higher [interest] rates go, the more cost to hold an asset that does not produce anything." https://www.youtube.com/watch?v=Q-5US4J03Wo https://www.youtube.com/watch?v=Q-5US4J03Wo 13:00 mark. Interest rates being higher means: get your money out of that speculative crap and into something where you can take advantage of the higher rates. But also because Bitcoin isn't what its advocates claim it is? It's speculation, not currency. Not a hedge against inflation. In fact it's inflated worse than USD. Worth 40% less than it was a year ago.
rrrrrrrrrrrryan 4y ago
The flight to safety is a little different this time. People seem to be investing in inflation itself: commodities have been on an absolute tear. https://finance.yahoo.com/quote/DJP https://finance.yahoo.com/quote/DJP

If inflation's so bad, why are gold and Bitcoin not posting massive gains?

by csense 4y ago

If inflation's so bad, why are gold and Bitcoin not posting massive gains?

fallingfrog 4y ago

Those are just vehicles for speculation like everything else.

danuker 4y ago

Because people are selling investments to buy food and fuel. If you want short-term inflation protection, add some commodities to your portfolio.

jollybean 4y ago
No, they are selling BTC because markets are crashing, they need the cash for other things. BTC will trend perfectly inline with stock valuations as a function of excess liquidity, kind of indicating they are not what they are supposed to be. They are a fun speculative instrument, when things get tough, people stop pretending and move onto other things. That may change, but unlikely. I see a future crypto 'mapped' to the real world in the future some how, not fully but only partically decentralized, that could work.
- PKop 4y ago
  >No, He said virtually the same as you..
  - jollybean 4y ago
    People are not getting out of crypto to pay for milk and bread, they are getting out because it's falling and they want to put their money in other things. I said 'pay' I meant to say 'invest'. BTC should be counter cyclical to stocks, but my bet is that they won't be. It'll be up during 'fun times' and down during 'scary times' whereas by design it should be the opposite. That could change if something about BTC becomes institutionalized, i.e. everywhere starts accepting BTC for Oil or something but I doubt that will happen.
    - danuker 4y ago
      Well, they are certainly not moving to stocks. How long are they going to wait until reinvesting their cash, with inflation at 8.6% per year?
      - jollybean 4y ago
        Yes, you're right, I'm lazy in my thinking. Probably not stocks, but maybe actually some value stocks. My point is just that BTC is not a safe haven from stocks.
- mattwilsonn888 4y ago
  People always wonder when Bitcoin will decouple from the stock market, but the real odd phenomenon has been the use of stocks to escape inflation.
  - rightbyte 4y ago
    Why is that odd? All these record profits surely are due to inflation? Which ends up in stock value?
    - mattwilsonn888 4y ago
      It's not an IQ test - its just odd. The de facto reason to buy stocks is to invest in production - not to escape inflation in a pure sense.
programmarchy 4y ago
Additionally, as whales exit their positions, they will be sitting on a mountain of cash ready to buy real assets in a fire sale once the bubble pops.

deltree7 4y ago

because there is no natural law that says Gold/Bitcoin will do well during inflation. Like all non-cash generating assets, it is driven by supply/demand and speculation (nothing to do with inflation protection) It is the snakeoil people who promised that and gullible idiots believed/memed/tiktoked that.

mattwilsonn888 4y ago
Inflation is a money supply issue, especially right now - money supply is directly relevant to inflation and hard assets. The reason these assets are not up is because the Fed is threatening huge constrictions to the supply of money which people are currently believing.
- deltree7 4y ago
  Wrong! A plot of land in rural Arkansas has been stable irrespective of Money Supply. The value of grain of sand on the beaches of South Carolina have been same. OTOH, Bitcoin is not an hard asset :) Hard/Soft classification are used by naive doomer-preppers (aka Peter Schiff). Assets are things that produce cash flow, rest is speculative. That's why the beanie baby (a "hard asset") that you bought in 1999 hasn't beaten inflation
  - mattwilsonn888 4y ago
    Assets are not "things that produce cash flow." They are simply property which has expected future value. You seem to be inebriated.
  - danuker 4y ago
    How do you count cash flow? Nominal? Or inflation-adjusted? If nominal, Venezuelan bolívars are the way to go. If inflation-adjusted, maybe you're on to something, but still depends how you measure inflation.

PKop 4y ago

Because the Fed is planning on raising rates and initiating QT for multiple months ahead, and they expect these actions to tighten monetary conditions and lower asset prices. If Fed actually does do this for a sustained period of time, everything but the dollar will be crushed, even US treasuries. It would be the polar opposite of printer go brrr.... maybe, vacuum go vrooom, sucking up all the liquidity and decreasing the money supply. If QE/rock bottom rates = everything bubble, the opposite would mean.... pop. At some point if/when this course of action becomes untenable due to recession/unemployment/too high interest rates given amount of debt in economy, and Fed reverses course (which they did much earlier last tightening cycle in 2018 when markets tanked), those two assets should rise again. Gold particularly falls when real interest rates rise. But, it is likely they are more serious about taking assets down and essentially inducing a recession given the persistent high inflation. The result of fighting that to any real degree means everything keeps going down...which is literally their goal (the reverse wealth affect to slow inflation).

legutierr 4y ago
> At some point if/when this course of action becomes untenable due to recession/unemployment/too high interest rates given amount of debt in economy, and Fed reverses course (which they did much earlier last tightening cycle in 2018 when markets tanked), those two assets should rise again. Right now unemployment is under 4%. The Fed has a lot of leeway to raise rates before what they are doing affects employment, and I'm not sure at all that they will allow unemployment to get too high, if they can help it.

gman2093 4y ago

You can't eat gold or bitcoins.

matwood 4y ago

Assets tend to correlate in volatile markets. There are plenty of papers discussing this effect. Because of diversification, people often need to sell higher performing assets to cover lowering performing ones. A friend ran a successful small investment fund, and still went out of business during the last down turn because all his clients had to pull their money out to cover losses elsewhere.

cmrdporcupine 4y ago

Jamie Dimon: "The higher [interest] rates go, the more cost to hold an asset that does not produce anything." https://www.youtube.com/watch?v=Q-5US4J03Wo https://www.youtube.com/watch?v=Q-5US4J03Wo 13:00 mark. Interest rates being higher means: get your money out of that speculative crap and into something where you can take advantage of the higher rates. But also because Bitcoin isn't what its advocates claim it is? It's speculation, not currency. Not a hedge against inflation. In fact it's inflated worse than USD. Worth 40% less than it was a year ago.

rrrrrrrrrrrryan 4y ago

The flight to safety is a little different this time. People seem to be investing in inflation itself: commodities have been on an absolute tear. https://finance.yahoo.com/quote/DJP https://finance.yahoo.com/quote/DJP