Bitcoin will outperform all other assets in 2023

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In a new report, Capriole Investments postulated that Bitcoin will outperform all other assets over the coming year for three main reasons. One of those reasons, perhaps unsurprisingly to many, will be the US Federal Reserve (FED) currently defining everything.

According to the firm, the market is currently experiencing the most aggressive monetary policy since the 1980s. The annual rate of change in M2 money supply is now negative for the first time, as analyst Dylan LeClair showed yesterday.

Uh guys, the ticket printer got stuck. pic.twitter.com/IimHwaoEaX

— Dylan LeClair (@DylanLeClair_) December 28, 2022

As Capriole Investments founder Charles Edwards explained, the Federal Reserve consistently lowered the fed funds rate in subsequent years when inflation exceeded 5% and then fell more than 20%, as saw him recently.

Although in any case, the peak of inflation persisted for several years. In 4 out of 5 cases, inflation normalized in the 2-3% range over the next few years, while Fed funds rates then fell, as shown in the chart below.

DEF pivot

“I expect this to be the golden decade of hard money,” Edwards continued and said history suggests further monetary tightening is not needed, making it very likely that the Fed will pivot over the next six months. This would also be in line with the Fed’s latest assessment, which calls for a further 75 bps rate hike, which could mean two steps (50 and 25 bps) or three steps (three times 25 bps).

Capriole Investments argues that the Fed’s need to pivot next year will be due to a number of reasons. On the one hand, the pressure on the economy is increasing, as evidenced by falling indices, massive layoffs at tech companies and sentiment in the housing market; on the other hand, debt will be a major driver:

Higher rates for longer put significant pressure on the US government to fund its debts. From the government’s perspective, it is better to have a higher benchmark inflation rate (say 2-4%), which helps reduce the relative debt burden over time.

Bitcoin is harder than gold

Capriole Investments compares today’s peak inflation to those of 1970 and 1975. “Both periods sparked huge bull runs in gold. From 1971 to 1975, gold soared 450% and between 1977 and 1980 it jumped 800%,” the company notes.

There are “compelling parallels” between today and the 1970s in terms of inflation trends. With Bitcoin being the “harder money” compared to gold, along with other advantages, Capriole Investments expects BTC to outperform its former competitor.

As a result, a second key reason for Bitcoin’s massive strength in 2023 will be its next halving in early 2024. Currently, BTC’s market cap is only 2.5% of gold’s market cap, which which means an upside potential of 3,739%.

Bitcoin vs. Gold

“In just over a year, Bitcoin will become the hardest asset in the world, with a projected inflation rate half that of gold. […] Each bitcoin halving has started a cyclical bull market in digital assets. Yet all the people who are halving expect it to be mainstreamed,” says Capriole Investment.

BTC ready for a bull run in 2023

Looking at fundamentals, Edwards notes that Bitcoin is trading within $100 of the Bitcoin bottom signals he gave in November. The most important graph according to Edwards is that of the cost of production of Bitcoin, “Bitcoin continues to trade at the lowest of the cost of electricity. Incredibly rare, low value.

In conclusion, the investment firm predicts that the 2020s will be the decade of hard money, similar to the 1970s. “For stock market investors, this could be called ‘a lost decade.’

“If you agree, the only question left is which hard money will prevail,” Capriole says, going on to say that Bitcoin is poised to outperform gold due to three major advantages: It’s more hard, it’s digital and it’s 1/40 the size. of gold, making it predestined for greater appreciation.

At press time, the price of BTC was still struggling to gain momentum, trading at $16,584.

Bitcoin price, 1-day chart

Featured image from Kanchanara/Unsplash, charts from Capriole Investments and TradingView.com

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