Bitcoin and The Dollar

I don’t want to call this a risk-off week even though stocks and bonds and precious metals rose and interest rates rose. I think it more appropriate to view the world a bit differently now because I think what we are starting to see is major concerns of the one market that is involved with nearly every trade in the U.S.—namely, the dollar. So, I’m starting to look at rising commodities, silver copper stocks, and yes, also rising interest rates as a “risk on” for the dollar. No market has illustrated this concern more than the rise in the price of Bitcoin from $10,494 on Sept. 22, 2020 to $22,860 as of Friday, Dec.18. That’s a 118% rise in three months!

In addition to Bitcoin, my IDW rose by 0.88% just this week. On an annualized basis that works out to a 54% rise. The changes in values in the individual non-weighted components in my IDW are displayed in the chart on your left. Silver, which serves as both an industrial commodity and monetary metal, leads the way with a gain of 77%. Stocks are still seemingly on the rise, but with rates very near zero, the bull market for Treasuries would seem to be nearing an end. 

The idea behind Bitcoin seems to be the realization that the dollar is heading toward the dustbin of history and since, unlike fiat currencies, Bitcoin’s supply is finite, younger investors who don’t really understand the reason to own gold are quickly heading for Bitcoin, which seems now to be going more and more mainstream. But the idea that you can buy all manner of stocks, bonds, and commodities to escape the risk of deflation may be erroneous, as explained by Charles Hugh Smith in an article he wrote titled, “Can 20 Years of Deflation Be Compressed into Two Years?” In answering in the affirmative, Charles notes that there is a tendency in nature for a reversion to the means, which means commodities are more than due for a rise while stocks and bonds are due for major declines as measured in dollars. However, the only true deflation that will take place will be measured in gold because gold will always hold its purchasing power while the dollar will not. That is the reason you need to own gold over the longer term and now, because the dollar is heading for its ultimate destruction at an accelerated rate of speed.

About Jay Taylor

Jay Taylor is editor of J Taylor's Gold, Energy & Tech Stocks newsletter. His interest in the role gold has played in U.S. monetary history led him to research gold and into analyzing and investing in junior gold shares. Currently he also hosts his own one-hour weekly radio show Turning Hard Times Into Good Times,” which features high profile guests who discuss leading economic issues of our day. The show also discusses investment opportunities primarily in the precious metals mining sector. He has been a guest on CNBC, Fox, Bloomberg and BNN and many mining conferences.