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If Trump’s tariffs are ‘America's Brexit’, then UK gilts will recoup ten years of underperformance versus US T-bonds. Meanwhile, as the AI bubble fully deflates, Europe’s stock market valuation versus the US will rerate by about 25 percent. The big ‘currency’ winner of the structural exodus from the US dollar will be bitcoin. Plus: a trade for the next four weeks is to go tactically long USD/CHF.
While most investors spent the month of April frantically refreshing their Twitter feeds for the next tariff announcement, we reiterate our stance that details on tariffs should be left to day traders. Long-term investors should be focused on the bigger story: the triple selloff in US stocks, bonds and the dollar. Foreign investors perceive that there has been a deterioration in governance in the US, and are requiring a higher risk premium from America. While Trump has walked back some of his most aggressive rhetoric, business investment will not resume unless we get clarity in policy. We continue to recommend a defensive stance, but downgrade duration from overweight to neutral to protect ourselves against shocks to the term premium. We also introduce Bitcoin to ours asset coverage. We upgrade it from underweight to neutral.
In this report, we reassess our bullish stance on crypto from early 2023, following Bitcoin’s recent all-time highs. While institutional adoption is broadening, there are also signs of excessive exuberance, speculation, and optimism. Given these conditions, a near-term correction appears likely. We are booking profits and will look to re-enter the market at $75,000.
In this volume of BCA Crypto we compare gold against bitcoin. We begin by dispelling some common misconceptions that investors have about gold, and why, at its core, gold is driven more by belief than by intrinsic value. We then proceed to explain why gold still serves an important role in our economy and how it differs from fiat money. Later, we explain how bitcoin is different from other cryptocurrencies, and why it could rival gold as a reserve asset in the future. Finally, we discuss the outlook for bitcoin, as well as which macro factors investor should watch.
Welcome to BCA Crypto - a research series on cryptocurrencies. Over the next few months, we will release a series of reports analyzing this polarizing asset class. In this introductory report we distinguish between fact and fiction, clearing some of the misconceptions that investors often have about the cryptocurrency market, cryptocurrency custody, market participants, risk, return and correlation. We conclude that while the correlation between equities and cryptocurrencies will stay relatively high until the end of the cycle, at least for Bitcoin, this correlation probably peaked last year.