The current Bitcoin rally has just about every institution and financial expert scrambling for explanations. Joining the flurry of opinions is Mark Yusko, the founder, and CEO of investment firm Morgan Creek Capital Management.
Increasing Debt Profiles Hamstring Fed
Speaking on CNBC Fast Money earlier this week, Yusko linked Bitcoin’s recent performance to the dollar. Yusko especially took aim at “zombie companies,” that often burden the Federal government in troubling times. As he explained, the company’s inability to finance its debt meant the Federal Reserve had no choice but to devalue the currency.
He added that this trend would continue as long as the pandemic’s effects remain prominent. If that happens, the country will see more of a capital flight from cash, which will ultimately benefit Bitcoin.
“Money is being devalued. Over the last three years, stocks are up about 6% a year – not really that great. But if you denominate in gold instead of dollars they’re down 44%; if you denominate in Bitcoin, it’s way worse.”
Investors Flee Shaky Dollar
Yusko isn’t entirely wrong. While the dollar remains the global reserve currency, it has taken a severe hit this year. Several major investors have advocated against holding physical cash, whether through interviews or their actions.
Hedge fund billionaire Ray Dalio said in January that “cash is trash,” adding that investors would only survive 2020 if they built diversified portfolios.
Warren Buffett has also made significant moves out of the dollar. In August, reports confirmed that Buffett’s investment conglomerate, Berkshire Hathaway, had invested $6.25 billion for a 5 percent stake in five of Japan’s largest trading houses. With the trading houses set to expand their portfolios globally, Buffett had locked into a new long-term investment.
The move also came two days after the Federal Reserve announced that it would allow inflation to rise above the planned two percent maximum. The announcement hit the dollar even more, with the USD currency index dropping to new depths at the time.
Max Keiser, a top cryptocurrency trader and commentator, shared his thoughts on Buffett’s moves. In a tweet, he explained that the Oracle of Omaha had seen cracks in the dollar and was jumping ship. The expert trader added a forecast for digital assets, saying:
“USD is trending lower today, about to break key support. Bitcoin – Gold – Silver Will all make new ATH in the near term.”
With the dollar currently in uncharted territory, investors have sought a safe haven all year. So far, Bitcoin has shown the most potential for this. The asset is testing its all-time high as it is and is on course to break $20,000.
Going by Yusko’s logic, this trend could very well go on and leave the leading cryptocurrency miles above its previous all-time high.