In recent months, uncertainty has reached new levels, with a pandemic that has paralysed financial markets around the world. For many commentators, such situations are ideal for Bitcoin to show its qualities as a safe haven. With the federal government in a frenzy of printing fiats, while introducing quantitative easing measures to revitalize the economy, the effect of the pandemic is likely to be significant and lasting.
In a recent episode of the Unchained podcast, Mike Novogratz, founder and CEO of Galaxy Digital, pointed out that traditional markets are introducing quantitative easing as part of their monetary policies, while in the case of digital assets such as Bitcoin, the opposite is true. Novogratz noted,
“Central banks are doing quantitative easing and Bitcoin’s central bank is doing quantitative tightening. We’ve just cut the supply, the new supply by half and we’ll do it again in four years, so it’s a symbolically very cold period for that to happen”
While the halving of the block award was supposed to advance the story of Bitcoin’s scarcity and bring the price beyond $10,000, so far the halving has not really pushed the price beyond its immediate resistance on the charts. However, Novogratz has argued that with the increase in disposable income for many individuals in the US, much of this cash will likely end up in the crypto-market. He emphasized,
“In 2020, disposable income in the United States will increase by 4 to 5% over 2019. It’s kind of crazy with 30% unemployment or whatever… Think about what I just said, so Americans’ disposable income is gonna go up 5% this year.”
However, if the year, an election year in the United States, were to see significant changes in the IRS’s capital gains tax policy, it could benefit crypto-markets. Mr. Novogratz went on to explain how the stock market, in such a scenario, would be severely affected, as users would continue to turn to crypto-markets. He went on to say
“You’re also going to go up 15 to 40 and the stock market’s going to choke on that. And you’re going to see a sharp drop in the stock market. If the Democrats win, I think it might be a little bit of a stretch. And all of a sudden people are going to say, “I can’t buy stocks anymore, but I can still buy Bitcoin because Bitcoin won’t be taxed like that.”
However, in the case of Bitcoin’s relationship with the stock market, the S&P 500 Index, the correlation has continued to increase over the past three months. According to Skew market data, the one-month SPX correlation has increased from -35% to over 65%.
With respect to the broader macro environment, Mr. Novogratz pointed out that there are a number of parallels between Bitcoin and the outside world. People today, he argued, are protesting for systemic change and while there is no direct correlation between these movements and the price of Bitcoin, they are invariably linked to the broader ‘macro mind’