In a new interview with Bloomberg Televison, Neuberger Berman’s Steve Eisman says artificial intelligence, infrastructure and Bitcoin are among the three most important themes of the moment. Despite that recognition, Eisman is not a fan of Bitcoin and crypto.

Protection against inflation, but not?

Bitcoin’s claim is of course that it acts as a hedge (protection) against inflation, but its correlation with risk assets such as the Nasdaq 100 (American tech stock exchange) actually shows otherwise.

“Ask people why they own crypto. Why do they buy it? They all say the same thing. They say it is a hedge against the decline of fiat money […]. It’s like digital gold, that’s the thesis.

Okay, let’s take their word for it. If that’s the thesis, then on days when everyone is worried about inflation, worried about the US government budget deficits, the Nasdaq is down 300 points and interest rates are rising, crypto should rise.

On days when everyone is feeling great, NVIDIA is rising, the Nasdaq is rising, interest rates are falling and no one is worried about inflation, crypto should actually fall. Does it act that way? No, it doesn’t act that way. It acts in the exact opposite way. The correlation with the Nasdaq is 75 percent.

To me, it’s just another way for people to speculate on speculation,” said Steve Eisman’s long story.

Are Steve Eisman’s arguments correct?

In a way, of course, Steve Eisman has a point, but he does look at inflation in a strange way here.

The inflation that we see on the signs has already taken place. If we read in the newspaper that there is 10 percent inflation, then it has already occurred.

You can see this clearly in the graph below. Every time the amount of liquidity/capital in the financial system peaked (or at least grew), the Bitcoin price also hit an all-time high.

Weekly growth in global liquidity – Source: CrossBorderCapital

In other words, as soon as inflation (money creation) took place, the Bitcoin price shot up. By the time the inflation figures come in, it has already happened. Then your cheese is more expensive, then your eggs are more expensive and then Bitcoin is also more expensive.

In that sense, Bitcoin does protect against inflation if you look at it this way.

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