Bitcoin Isn’t Safe, Neither Is Much Else

Crypto people are naturally pretty excited about Bitcoin’s strength the past week. It’s not hard to see why.

It couldn’t come sooner for crypto believers in need of a morale boost. Bitcoin has been little more than a worse-performing version of the stock market lately and at the same time getting its butt kicked by gold, right as soaring inflation threatens the global recovery. The narrative needed a savior; unprecedented financial sanctions on a major European country might have saved the day. But it’s hard to get too excited about this narrative until Bitcoin more meaningfully disconnects from risk assets. It’s only been a session or two, and we’ve seen stock market bulls also try to make a stand since the middle of last week. If Bitcoin can get back to 50K while stocks are on the lows, that would be truly impressive.

The reality is, not much out there impresses at all — apart from soaring commodity prices and (possibly) gold. But both of these assets got a clear boost by the war in Ukraine, which means they’re subject to sharp reversals lower if peace emerges in Eastern Europe. And even riding the commodity train is effectively an exercise in market timing, with the Fed looking eager to cool down prices. Portfolio managers skewing their holdings toward energy stocks the last three months could at any moment get a rude reminder of what kind of uniquely unpredictable volatility is possible in an asset that priced negative just over a year ago.

Even Treasury yields are proving a tough bull to wrangle, with a shocking reversal lower in the past few days. That’s crushed financial stocks, which never really took off the way everyone was hoping they would when the Fed started talking hikes.

Perhaps the most discouraging move in the market though has been the selloff in reopening trades in the face of nationwide de-masking and plunging hospitalization rates. This latest emergence from omicron is looking like the real permanent deal, and yet people are dumping airline, travel and hospitality stocks to near the lowest levels in a year.

Where is there to hide? If bear markets keep piling up across sectors and themes like they are right now, I doubt Bitcoin will be the savior many hope it will be. If something with real cash flows doesn’t start rallying soon, the US dollar back at 52-week highs looks once again like the strongest candidate for safety.