Yesterday was a 101-level class on why to follow money flow as opposed to narratives.
We were presented with a CPI of 9.1%, exceeding the expectations of 8.8%. By CPI standards, this is the highest inflation in 40 years.
And, yet, gold got crushed.
I saw this meme while mindlessly scrolling through Twitter and found it pretty hilarious:
We’ll say it again, because it bares repeating.
Bitcoin is NOT an inflation hedge — at least not yet. And, by extension, nor is the rest of crypto as an investable asset class.
The market is treating the two as yet another long-duration growth trade.
Or, less formally, Bitcoin is a Nasdaq stock.
The correlation between the two continues to remain highly elevated as they trade tick-for-tick.
Admittedly, I’ve argued in the past that we’d see Bitcoin decouple from equities, even going so far as to say,
I’m going to stick my neck out and say Bitcoin will dislocate from equity markets in a powerful rally sometime in the next few months.
I think considering how long this correlation has survived, it’s likely here to stay for some time.
It’s more important to simply identify the circumstances we’ve been dealt and adjust our approach from there.
That is, Bitcoin isn’t an inflation hedge.
As apparent as this statement may seem, it only underscores our responsibility as traders to follow the only thing that moves markets — money flow.
Listen to money flow.
Ignore everything else. It’s all noise.
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