Liberation for Bitcoin from equities?

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Liberation for Bitcoin from equities?

The crypto markets are performing relatively well at the moment, although fear persists. The most likely explanation for this dynamic is that market participants have factored certain risks, such as tariffs and global tensions, into their pricing, but macroeconomic uncertainty persists. 

 

Markets are doing relatively well now because they have priced in the bad news, which has adjusted forward expectations downward. Having taken into account those adjustments, and with most economic indicators still positive, it makes sense that markets can continue on an upward trajectory. However, uncertainty hasn’t been fully priced in.

 

First and foremost, following Wednesday’s Liberation Day, the day Trump’s reciprocal tariffs are set to begin. Will other nations blink? Will Trump? How hefty will the tariffs ultimately be? All of these add to the uncertainty.

 

Next week, I hope the tariff situation is resolved relatively amicably. However, if it isn’t, one interesting question I’m curious about is this: if the tariffs turn out to be worse than what market participants have priced in, will traditional U.S. markets suffer more than Bitcoin? Typically, Bitcoin (and other cryptocurrencies) perform worse or, at best, remain unchanged during traditional market drawdowns.

 

However, some of the people I follow are saying that this time might be different. First of all, Bitcoin has corrected more complex than U.S. equities; the peak drawdown was 30% to 10%, respectively. U.S. markets have seen money flow out of the United States to local markets, which have experienced growth. 

Further tariff problems, as well as local assets being undervalued, may make this flow out of the U.S. susceptible to this impact. Coupled with the belief that U.S. equities are overvalued and local assets are undervalued, this could lead to the flow out of the U.S. continuing or accelerating. Meanwhile, it seems reasonable to assume that Bitcoin, a global asset, would be less susceptible to this impact. 

Finally, America is tightening, whereas other countries, such as Germany and China, are easing. As a global asset, Bitcoin is much better situated to absorb some of that liquidity than U.S. equities.

 

All of these points are logical and quite persuasive. Still, I ultimately disagree that Bitcoin will float if U.S. equities tank for the simple fact that "the market can remain irrational longer than you can stay solvent," as Keynes famously said. I believe markets will act irrationally. If U.S. equities fall, Bitcoin falls the same amount or more. Graham Stone noted on this week’s Token Narratives that if this happens, “buy Bitcoin with both hands.” I concur!

 

That is all short-term talk. In the mid-to-long term, Bitcoin appears exceptionally well-positioned for price appreciation. This week was marked by bullish news surrounding the theme of companies incorporating Bitcoin into their balance sheets.

 

When Saylor first started acquiring BTC via his company, formerly known as Microstrategy, it led to a significant increase in the stock price. Many speculated at the time that Microstrategy’s success would eventually lead to a new playbook for companies, especially those with fading relevance.

 

We finally might be seeing companies pile into this trade. Metaplanet, a Japanese hotel developer that bought its first Bitcoin less than a year ago on April 8, 2024, has seen its stock price soar more than 2,300% since that date. With its latest purchase on Monday, it now holds 3,350 BTC. The CEO posted on Monday on X in Japanese, “Today, the company recorded a record-high trading value of 50.4 billion yen.” It is ranked 13th in terms of trading value in Japan, surpassing Toyota, which has the highest market capitalization.”

 

On Wednesday, GameStop announced that it is raising $1.3 billion to implement its Bitcoin treasury strategy. It is raising money despite holding $4.76 billion in cash, which mirrors an aggressive, Microstrategy-style playbook. Saylor responded to the announcement by posting a poll on X, suggesting that GameStop should buy over $3 billion in Bitcoin to earn BTC legitimacy. 

 

Additionally, this week, a French Bitcoin treasury company purchased 580 BTC, and earlier this month, Rumble acquired 188 BTC.