Former financial analyst at the largest American investment company Bridgewater Howard Wang published an extremely curious material on the global monetary system, calling it "an even bigger financial bubble than the bitcoin cryptocurrency":
“In December 2017, I wrote an article 'What Causes Asset Prices To Explode' and it published the graph you see below. A couple of days later, bitcoin prices peaked and fell 85% in a year. Bitcoin is back today. I believe we are in the midst of yet another bubble, but this time I'm not sure when it will climax. The graph below is an updated version of that graph.
Let's stop kidding ourselves. Bitcoin as it stands is not a viable candidate for a currency replacement. If we were to measure US annual inflation in bitcoins, not dollars, then you would see inflation of 275% in 2018, -50% deflation in 2019, -75% deflation in 2020. A healthy society cannot function with such volatile prices. The currency must be stable enough so that if you get paid on Friday you know what kind of dinner to buy on Sunday. Bitcoin may one day mature, but now it is more of a speculative asset.
Bitcoin is almost certainly in another bubble and its current growth rate is volatile. If 2021 turns out to be the same as 2020, Bitcoin's market capitalization will be larger than the entire US currency in circulation.
And yet this time I am not sure that I can predict the top. The world monetary system is in an even bigger bubble. Investors are forced to hold $ 18 trillion in negative-yield debt while trillions of dollars are printed around the world. Investors are drowning and grabbing onto cryptocurrency as a lifeline.
While persistently low returns will drive up prices and suppress expected returns in all markets, many investors will prefer unknown expected returns on risky assets to guaranteed bond losses. Like panicked prey pursued by predators, investors prefer to hide in markets that lack fundamentals or in assets that have grown rapidly and still have plenty of room for imagination, such as Tesla.
In the short term, there is still a lot of cash flow from incentives, and some organizations are betting on the crypto space. This bitcoin party can continue as long as the stakes are low and the printing press is hot.
Bitcoin is the flip side of the same coin as monetary currencies. Its long-term fate depends on the future of our monetary system. Since the 1980s, deflationary pressures have led to lower interest rates and eventually the need to print money around the world. As long as this trend continues, investors will avoid guaranteed losses on government bonds. Capital will run up the spectrum of risks, pushing prices higher, lowering yields and creating "inflated" asset prices.
As long as the world is awash with money and safe assets offer meager compensation, Bitcoin will be relevant. Volatility and asset bloat will become a reality. It will be difficult to predict the tops of these bubbles, because the core of the monetary currency with which we measure prices is itself in a bubble..."