Bitcoin’s new record high just proves it’s detached from reality

Bitcoin hit a new record recently, which just goes to prove how detached the price is from anything approaching common sense.

Bitcoin prices are surging ever higher.

The latest US inflation number was not a good number – either in terms of inflation in America or what the Fed would do with interest rates, first, next week, and then through the year.

Yet after an initial blip, the “smartest guys in the room” drove the overall market – the S&P500 – to a new all-time high, and the Dow to an all-but similar finish.

That, and Bitcoin shooting to yet another of its own record highs, over $US72,000 – valuing it, whatever that actually means, at over $US1.4 trillion ($2 trillion) and almost as much as the entire Aussie market – tells you that Wall Street is well and truly captured again by the “irrational exuberance” once identified by then Fed head Alan Greenspan.

US CPI inflation printed at 0.4 per cent for February. That was above the expectation of 0.3 per cent – and one

smart-arse prediction by a wet-behind-the ears no-nothing of 0.32 per cent, that I saw.

It should have rung a very loud bell about the prospects of rate cuts from the Fed. Yes, initially, it did, but then, what the heck, let’s run with the bulls.

Now 0.4 per cent annualised is 5 per cent.

Taken with January’s 0.3 per cent, it was still close to 4.3 per cent annualised.

Even the last six-months annualised was above 3 per cent; and the inflation trend was clearly, if true, only modestly upward.

The Fed’s mandate is to get it down to 2 per cent, not our RBA’s 2-3 per cent range or even the RBA’s 2.5 per cent mid-point. But 2 per cent.

These were not numbers – or trend – on which the Fed could contemplate even a single rate cut.

Especially with the US economy looking, generally, robust – with only some slight weakening in the labour market to be discerned.

The Bitcoin phenomenon is obviously of its digital, 24-7 globally inter-connected

anti-US dollar hegemony times.

It is also both the new “hedge-against-inflation” and the “heading to the

moon” Poseidon of our 21st century times.

Or, as the AMP’s Shane Oliver sardonically described it: “Bitcoin to infinity and beyond.”

Either and both of the general market reaction to the inflation data and the crazy spiralling ever-upwards of Bitcoin are not indicators of either a healthy (US) economy or US stockmarket.

Or indeed, basic rationality. Earth to Wall Street – and then on, to Down Under.

If we get another print, far less two or three, like February’s 0.4 per cent (or, perish the thought, prints of actually higher numbers), you cannot only forget about US rate cuts, but you will get interest rate Hikes, with a capital-H.

The Fed’s March decision – and, more importantly, both its forecasts and its rhetoric – surfaces early Thursday morning next week.

Our own RBA will have had its first meeting and decision away from the first Tuesday of the month, two days earlier.

As I’ve explained repeatedly, it’s what the Fed does that drives both Wall Street and our market. The RBA’s rate decisions are irrelevant.

Those decisions, though – and even more, the RBA’s tenor and guidance – are critical to homeowners, to borrowers and potential borrowers, and the property market.

Originally published as Bitcoin’s new record high just proves it’s detached from reality