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Aug 1, 2020
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Bitcoin Is Rising Again. Asking Why Takes You Down the Financial Rabbit Hole.

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I think I’m ready to issue my next Bitcoin prediction. I’m consistently wrong, which makes this a valuable service.

In mid-February, after Bitcoin had shot from $4,000 to $10,000 in a year, I raised the question here of whether speculative excess might push it still higher. Then it fell by half in a month. I imagine that readers who recognize a good contrarian indicator when they see one, and who knew that Bitcoin options had begun trading in the U.S. in January, made out handsomely on the puts.

Bitcoin has now bounced back above $11,000, and readers seeking the mathematical inverse of wisdom on the matter will once again find it, as soon as I can make up my mind about some last-minute details, like up or down, and by how much.

First I have to figure out what’s driving the rebound. The leading suspect is a slip in confidence in the U.S. dollar. It’s down 7% versus a basket of six key currencies since mid-May. Goldman Sachs recently pointed out that the dollar’s change ranked among the most extreme 2% of two-month moves since 1973. Its strategists cite the U.S. coronavirus surge and the heavy Treasury issuance that will be needed to deal with it.

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