Cash flow (or lack thereof) in global markets has led major, smart money investors to dump volatile or high-risk assets (like Bitcoin) in favor of the dollar itself, says Travis Kling, CIO of Ikigai.
Institutions Head for the Dollar
The firm’s name is a Japanese word which typically is “used to indicate the source of value in one’s life or the things that make one’s life worthwhile.”
The way Kling sees it, due to irresponsible fiscal policy and lethargic liquidity in global markets, funds are fleeing the markets themselves in favor of being liquidity providers.
Some smart investors that actually like and respect me say I'm crazy for thinking that Global Macro has a big effect on crypto.
I think they're crazy for thinking these two things are entirely unrelated. pic.twitter.com/xYTSJVbCY7
— Travis Kling (@Travis_Kling) September 25, 2019
Kling believes that global trends and markets are bound to play a serious role in crypto markets. After all, if fiat economies well and truly crash, what is the “market capitalization” of a given cryptocurrency? Things get awfully fuzzy at that point.
Kling added in a later tweet that Bitcoin’s turbulence is one mild side effect of the overall impact of Federal Reserve policy.
If you drop a big rock in the middle of a pond, how far do the ripples go?
All the way out. Getting smaller as they go.
If you throw a wrench in the quadrillion dollar eurodollar market, how far out does liquidity hiccup? BTC 30-day circulating supply is <$20bn. Small ripple.
— Travis Kling (@Travis_Kling) September 25, 2019
So A Federal Reserve Lends A Treasury 3/4 of a Trillion Dollars…
The US central bank has been at odds with President Donald Trump about the prime rate while also lending the Treasury nearly $1 trillion in the past couple of months. That’s money the Fed cannot then pump into the economy via the legacy fractional-reserve banking system that Bitcoin may or may not disrupt.
Kling is a bit of a heretic in Bitcoin maximalist circles for obvious reasons: he does not accept the precept that Bitcoin is forever ignorant of external markets. If anything, it could be argued, Bitcoin is often a useful measuring stick as regards said markets.
Whatever you believe, it’s dangerous to think that anything – gold, Bitcoin, or cash dollars – of and by itself would rescue you in the event of a real global breakdown. Therefore, the bigger and more fundamentally sound Bitcoin and other cryptos become, the more we should expect external markets to have a regular impact on things like price, demand, and trading volume.
If a few institutions dumped Bitcoin now in order to have a stronger position in fiat markets, they may give it a boost later if they decide to catch it on its way back up at a later time.
While Kling generally believes that Bitcoin is a marvelous hedge against government madness – as he famously decreed in the CNN video below – the investing professional reminds us that opportunities can be wasted when we adhere to strictly to principals such as “hodl.”
