Bitcoin doesn’t seem to be catching the cheap fiat it was meant to catch.
The crypto markets have been bounding along this last couple of weeks, especially coins that fall into the categories of DeFi tokens, and being named Chainlink.
Other high performers recently include Stellar, which it’s been revealed is going to be a new addition to the Samsung Blockchain Keystore, as well as Enjin which is up a cheeky 15% today, presumably from the reflected glory of also being part of the keystore.
Algorand did one better, zipping up 25% the moment it was publicly revealed to have received a Coinbase listing, while BNB is feeling just a little bit floaty in anticipation of the next coin burn. The crypto markets overall appear to be quite lightweight at the moment, and willing to rise with little provocation.
Bitcoin is the exception. While the altcoins party, Bitcoin has spent months sulking in an increasingly narrow price range, and has now moped its way down to the low $9,000 range.
If you ascribe to the theory that recent altcoin actions are tied to all the stimulus washing the world, this may not bode well for Bitcoin.
Crypt runneth over
One analogy for the current situation of mass fiscal stimulus is that it’s like the world’s investors are trying to collectively manage a bucket that’s overflowing with water, but is still being filled up. They don’t want to waste the water so they’re racing around the house trying to find all the pots, pans, jars and other receptacles they can to catch as much of the overflow as possible.
But as all the sensible containers get filled to the brim, they have to get increasingly daring with their choice of containers, until eventually they’re catching the water in cardboard boxes and shoes.
In this analogy the water is money and the containers are investments. If it overflows it’s being lost to inflation and generally not earning the returns it could. But all the most sensible containers are full to overflowing, and people are increasingly leery about putting more money into them.
This isn’t unique to pandemic times. Recent decades have been characterised by the exact same problem of free-flowing money (for some) and not enough places to put it. Increasingly toxic debt was just another container investors used to try to catch overflowing money prior to the 2008 GFC.
As such, the pandemic and economic crisis, paired with massive stimulus, poses a potential problem. The bucket’s filling up faster than ever while containers are springing holes. Real estate probably won’t look tempting until it’s finished chewing through tens of millions of evictions and whatever the pandemic does to our living habits, while the unflinching reaction of most stocks to today’s grim economic outlook is becoming less reassuring and more terrifying.
It truly takes nerves of steel to join Elon Musk’s cult of personality at these prices, at a time like this.
Bitcoin has always wanted to be the receptacle for this kind of situation, but that hasn’t eventuated. Instead altcoins are soaking up some the excess money, especially the ones that promise to do something more than just sit around looking pretty.
It just needs to be a store of value, but it seems people today are preferring to store their value in equally risky but more immediately rewarding vessels.
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Disclosure: The author holds KDA, ETH, BNB, BTC at the time of writing.
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