American billionaire Stanley Druckenmiller has warned that the US economy will slide into recession next year, saying that amid rising inflation he would “rather own more Bitcoin (BTC) than gold.”
Druckenmiller, founder of hedge fund Duquesne Capital, also said, “We’ve been in a bear market for the past six months…it’s very likely that the bear market will continue” and that the stock market slide isn’t over yet.
At last Thursday’s virtual 2022 Sohn Investment Conference, Druckenmiller said most indicators were pointing to a southbound economy.
“Inflation has never come down without a recession, and I think a recession is on the horizon,” the billionaire said in an interview with Stripe co-founder John Collison.
Last week, the US Department of Labor reported that the annual inflation rate rose to 8.6% in May – the highest level since 1981.
“Given the extent of the asset bubble and the destruction of the markets; Given what’s going on in Ukraine, given the zero-Covid policy in China…I have a strong expectation that we’re going to have a recession sometime in 2023,” Druckermiller predicted.
Druckenmiller favors BTC over gold in inflation bull market
The 68-year-old investor, who is credited with pioneering an investment strategy known as “macro trading” along with fellow billionaire George Soros, was asked if the crypto industry had started to influence other asset classes.
“I don’t know if I see it, but I expect it,” he explained. “You can’t build over $2 trillion in purchasing power in wealth and then take out $1 trillion and it doesn’t matter. There certainly seems to be a strong correlation between crypto and the Nasdaq, so I look at it as an indicator in that way.”
Druckenmiller, who boasts an estimated net worth of $10 billion, went on to say:
“I will be very surprised if blockchain is not a real force in our economy in about 5 to 10 years. I find crypto interesting and watch it. If we have an inflationary bull market, I would want to own more bitcoin than gold, but if it’s bearish for other assets, you want to own gold.”
Druckenmiller’s comments followed similar views of another hedge fund billionaire, Ray Dalio, who reiterated that “cash is trash” and stocks are “trashers.”
The Bridgewater Associates founder said he prefers “a digital gold like Bitcoin” instead.
Bitcoin as digital gold
Bitcoin has drawn comparisons to gold, and the top crypto asset is now being accepted as the digital equivalent of gold in some circles.
In 2020, many people believed that Bitcoin was ready to transition from a risky speculative asset to the crypto market’s version of the metal after its correlation with gold hit an all-time high.
In fact, this argument may have faltered with the massive decline in crypto markets this year. Reports from Bloomberg showed that BTC’s correlation to gold dropped to almost zero in early January, and as bitcoin prices fell in later months, gold continued to rise.
In April, the 50-day correlation coefficient for BTC and gold was around minus 0.4, the lowest since 2018, Bloomberg said. A value of 1 means assets are moving in lockstep, while minus 1 is the opposite.
Crypto markets are instead more tied to the exchange, particularly blue-chip tech stocks like Apple, Amazon, and Microsoft. Over $1.6 trillion has been wiped from crypto markets so far this year.
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