Why isn’t Bitcoin doing better these days?

That is the question posed by Bloomberg’s Joe Weisenthal as well as by Goldman Sachs’ Lloyd Blankfein.

Keeping an open mind about crypto, but given the inflating US dollar and the stark reminder that governments can and will under certain circumstances freeze accounts and block payments, wouldn’t you think crypto would be having a moment now? Not seeing it in the price, so far….

— Lloyd Blankfein (@lloydblankfein) March 7, 2022

It is a pertinent question indeed. In a landscape of rampant inflation, war, sanctions aimed at isolating Russia completely from global financial markets, and even supposedly “liberal” governments like Canada’s taking unprecedentedly illiberal measures to freeze bank accounts of political opponents, one would believe that Bitcoin would be doing better. But it is not.

Instead Peter Schiff is taking the victory lap over gold’s belated break-out through the $2.000 threshold and gleefully predicting Bitcoin’s imminent demise.

There is no question that Bitcoin has failed as an inflation hedge in the short term. Since the all-time high of ~$69.000 in November Bitcoin has taken a just as bad beating as the most over-hyped Nasdaq stocks, whereas gold has held up amid expectations of monetary policy tightening and finally surpassed its 2011 high. Contrary to Bitcoin, gold has done its job as an inflation hedge in the short term, but not in the longer term.

Weisenthal argues that:

The big problem seems to be that for all of the rhetoric about how it’s an inflation hedge and freedom money and all that, it’s just not really treated like that by the actual people who trade it. 

Bridgewater Associates’ Chief Investment Strategist, Rebecca Patterson, similarly said that Bitcoin is still trading more like an emerging tech stock than digital gold in an interview on CNBC yesterday, and that the digital currency has yet to prove itself as a store of wealth.

Narrative Flippening?

The question now is if the narrative can flip. From the market seeing and Bitcoin like a typical risk-on asset, trading in tandem with tech stocks, to view it more as a risk-off asset more akin to a digital gold? The current market environment, with next week’s much-awaited Federal Reserve meeting along with the financial fallout from the Russian-Ukrainian conflict do provide a perfect pretext for such a narrative flip to take place. It remains to be seen if it will.