Is it a good thing that bitcoin ISN’T being held by nation-states?
A month in- where are we at?
As last week’s article more thoroughly laid out, we’re currently in the midst of the single-worst energy crisis of not only our lifetimes, but in world history [IEA]. That crisis is coming as the result of a full-blown regional war in the Middle East.
Not knowing anything other than that, one would expect oil (given the fundamentals of the situation) would be expected to be in the $150 area and neutral reserve assets like gold should be strong, the stock market to be down massively and Bitcoin, not-yet widely adopted as a neutral reserve asset, would likely be quite weak given its high beta to stocks.
But that’s not what we’ve seen
Gold, arguably what should be the strongest, is actually the weakest. US Treasuries, the multi-decade safe haven, are also down (rates up). Bitcoin, with its usual tendency to be high-beta and risk-on, is actually by far the best-performing asset since the start of the war.
Cross-asset performance since the war in the Middle East started.
Why? What does it mean?
Let’s start with gold, as it’s probably the most counter-intuitive in terms of performance, and the reason for its sell-off is still not widely understood-
Remember that the Gulf Cooperation Council (GCC) countries are all huge surplus countries. Some current accounts in the GCC are a whopping 20% of GDP. By definition, this means they generally accumulate assets in the form of fx reserves.
A few of the GCC Current Accounts
Another trait of the countries …