What Now for Bitcoin?

“Never wrong—just early.” 

That was the humorous little saying a Wall Street Journal editor shared with me in my early days writing the Heard on The Street column.  

It was the early ’90s and I was writing a column about a mortgage lender. I asked the editor what happens if we were wrong, and that’s when she dished up that cute bon mot.  

Seems appropriate too these days for my take on bitcoin and crypto writ large.  

We are certainly in a bit of a rotten moment for crypto. Prices have come off quite painfully. All over the media, lots of jawboners are saying, “See—bitcoin is not an inflation hedge.” 

But to my way of thinking, determining whether the granddaddy of crypto is or is not an inflation hedge at this point is like picking the winner of a baseball game at the end of the first inning.  

Seems premature. We have a long way to go.  

Here’s why I say that: The Federal Reserve—the same Federal Reserve that claimed inflation was “transitory” and that a soft landing was likely for the slowing U.S. economy—now says that maybe a hard landing is likely. 

By that, it means an economic crash is likely.  

The thing about a hard landing is that the Fed is not going to keep raising rates as that possibility grows. The Fed will wimp out. It can’t enforce that kind of pain on America’s egregiously indebted consumers, businesses, and government.  

Instead, this fall the Fed will step back from the abyss and cut rates. Probably start buying bonds again to stimulate the economy. 

And in doing so, it will accept that inflation has won. Really, it won’t have any other legit choice.  

That’s the moment we will find out that bitcoin—and Ethereum and Solana and other cryptos—is in fact a hedge against inflation. 

Investors at that point will see that the Fed is an emperor sans clothes…that inflation is here to stay…and they are going to race around in search of assets that will survive and thrive.  

That certainly won’t be the dollar.  

Our currency is facing extensive problems going forward. Some stocks will fare well. Bonds will probably reverse course and start moving higher too.  

But bitcoin will very likely be the belle of the ball as it sprints toward six figures.  

So why is that not happening now, Jeff?  

Because the Fed walks small and carries a big megaphone. 

It’s yelling loudly about doing everything imaginable to bend inflation to its will. People are freaked that the Fed is gonna live up to that threat…that it’s going to keep raising interest rates until inflation collapses to 2% or less from its near 9% level these days. 

So, investors are fleeing risk-on assets. 

The reality of what the Fed does, I suspect, will prove very much different 

The Fed, after all, has a fairly hideous track record of accuracy. Don’t see a reason why that suddenly changes, given the economic environment we’re in.  

What I see changing is the Fed’s hawkish stance.  

Remember that Prince song from the ’80s, When Doves Cry? 

That’s gonna be the Fed soon enough.  

In a world where the dollar is dipping and inflation remains robust, investors will gravitate toward bitcoin because it exists in such limited quality—just 21 million coins.  

Scarcity is the primary tenet of a sound currency. The dollar certainly can’t claim either description—scarce or sound.  

And so we wait. 

It’s likely to be an unnerving and volatile wait. Bitcoin will remain quite bouncy. The Fed will remain quite verbose. 

But when the final pages are written on this chapter of the American economy, the historians are going to note that this weird, electronic currency that began in 2009 and was designed to counter government malfeasance, did indeed live up to its billing as a hedge against inflation.  

What I’m saying here is that despite the volatility, you might wanna add bitcoin to your portfolio if you don’t already own it. And if you do own it, maybe add a bit more. Five percent of your investable assets is enough. Because when bitcoin takes off again, it’s gonna run up well into the six figures.  

How can I be so sure? 

Never wrong—just early.