Increase in Value of Bitcoin Likely as US Dollar Depreciates and Bond Yields Rise, According to Professionals

In a remarkable turn of events, gold has reached an all-time high of $3,578, marking a significant 35% increase this year. This surge comes amidst a declining U.S. dollar, which has dropped 11% this year, its sharpest fall since 1973, as per the U.S. dollar index (DXY).

The decline in the U.S. dollar occurs amidst a bond market sell-off, with investors demanding higher returns to lend money for longer periods. This trend is causing a steepening of the yield curve, particularly in the case of 30-year Treasury yields. Robin Brooks, a senior fellow at the Brookings Institution, has highlighted this unusual rise during a Fed easing cycle.

The shift of many countries' debt issuance to short-term maturities has led to a global increase in long-term government bond yields. Inflation concerns are the primary reason for this surge, with investors seeking higher returns to counteract the eroding purchasing power of their investments.

The steepening yield curve signals rising inflation expectations and potential economic growth. However, some experts, such as QCP Capital, believe that a weakening U.S. dollar, rising governance risks, and yield curve steepening are creating a bullish narrative for Bitcoin. The firm BlackRock has also announced a bullish narrative for Bitcoin, citing a weakening U.S. dollar, rising government risks, and a flattening yield curve of bond interest rates as key factors.

U.S. institutions are hedging against the declining U.S. dollar by investing in assets like gold. Gold's year-to-date return hovers around 96%, down nearly 11% from its record high of $124,545. Despite this dip, gold remains an attractive option for investors seeking a safe haven during uncertain economic times.

The liquidity from gold may follow into "fixed supply assets" like Bitcoin and Ethereum. With Bitcoin's year-to-date return of 96%, it is outperforming the market, as predicted by Gregory, when inflation is on the rise. However, the recent bond sell-off has widened the gap between short- and long-term yields, steepening the yield curve, which could potentially lead to increased volatility in these assets.

Growing concerns about the Federal Reserve's independence are present, with President Donald Trump applying pressure to Fed Chair Jerome Powell to lower rates this year. The fear of the Fed's independence is causing premiums to remain "higher at the long end," according to QCP, which could further contribute to the steepening of the yield curve.

In conclusion, the declining U.S. dollar and rising inflation are driving investors towards safe haven assets like gold and potentially Bitcoin. However, the steepening yield curve and the uncertainty surrounding the Federal Reserve's independence could lead to increased volatility in these markets.

Increase in Value of Bitcoin Likely as US Dollar Depreciates and Bond Yields Rise, According to Professionals