BREAKDOWN: Bitcoin Isn't Acting Like Stocks, Stocks Are Acting Like Bitcoin
CoinDesk Podcast Network
CoinDesk
4.8 • 689 Ratings
🗓️ 4 March 2021
⏱️ 16 minutes
🧾️ Download transcript
Summary
As the financial world debates rising Treasury yields and waits for Fed Chair Powell’s comments, has bitcoin just become another risk asset?
This episode is sponsored by Nexo.io and Casper.
Over the last year there has been a growing correlation between the stock market and bitcoin. Some of this is attributed to the new traditional participants in bitcoin. Some of it is attributed to bitcoin acting less like an uncorrelated hedge and more like just another risk asset.
In this episode, NLW argues that the notion bitcoin has started acting more like stocks is, in fact, completely backwards. Instead, in a negative, real interest rate environment, stocks have started to act more like bitcoin - as a store of value.
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Transcript
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| 0:00.0 | Let's have the right framework as we look at stock's relationship to Bitcoin. And the key point |
| 0:05.0 | is that Bitcoin didn't start acting like stocks. Stock started acting like Bitcoin. Storing value and |
| 0:11.2 | giving early buyers asymmetric upside on the way to asset maturation is what Bitcoin was designed to do. |
| 0:18.2 | Welcome back to The Breakdown with me, NLW. |
| 0:22.4 | It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. |
| 0:28.8 | The breakdown is sponsored by nex0.io and Casper and produced and distributed by CoinDesk. |
| 0:35.8 | What's going on, guys? It is Thursday, March 4th, and today I am going to try to flip a mental model. |
| 0:43.6 | Here's my proposition. |
| 0:45.4 | Bitcoin isn't acting like stocks right now. |
| 0:48.9 | Stocks are acting like Bitcoin. |
| 0:52.1 | So to start this conversation, we need to hop on over to FinTwit, where there is a |
| 0:56.1 | lot of discussion right now around rising treasury yields. When the year started, the 10-year |
| 1:02.3 | treasury yield was at 0.93% versus the closer to 1.47% it is now. That yield spiked even over 1.6% last week. So what is driving the rise of these |
| 1:16.1 | treasury bonds, this U.S. government debt? In short, it's expectations of a stronger economy. |
| 1:22.4 | Vaccines keep getting rolled out with new ones coming on the market, which suggests that all |
| 1:26.9 | American adults who want to can be vaccinated by basically the coming on the market, which suggests that all American adults |
| 1:27.6 | who want to can be vaccinated by basically the beginning of the summer. Simultaneously, you're |
| 1:32.3 | seeing restrictions on businesses being rolled back. And the market doesn't believe, in effect, |
| 1:37.1 | that the Fed is going to be able to keep rates as low as they've been, or continue the sort of |
| 1:42.5 | asset purchase programs to provide liquidity that they've |
| 1:45.3 | been doing. Now, these rising treasuries have been causing havoc in the public markets, |
| 1:50.4 | and part of the issue is valuations. The S&P 500 is currently trading at 22x expected earnings, |
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