By CCN: The frequently volatile stock market provides rare hideouts for investors but one of them could be bitcoin, according to Mr. Peter Boockvar of Bleakley Advisory Group.
The chief investment officer said this week that a sharp rise in bitcoin price indicated that investors were unsure about the Federal Reserve's stance on interest rate cuts, as well as about the outcome of an ongoing trade war between the US and China that kept buying sentiment weaker in both the Western and Asian stock markets.
"I watch bitcoin as a signal, not because I want to own it because I'd rather hold gold as an alternative currency," Mr. Boockvar told CNBC, adding that the yellow metal price leaped to levels not witnessed in more than a year soon after the bitcoin price rally.
"I don't recommend buying bitcoin in either direction because I don't care for it as an asset, but I do care for it as a signaling mechanism that I think was a tip-off in the bounce in gold."
Fed Rate Could Determine Bitcoin and Gold Price
Between May 5 — the day President Donald Trump announced that it would hike duties on $200 billion worth of Chinese imports — and May 13 — the day China retaliated with a similar move on $60 billion of US imports, the value of bitcoin surged by more than 45-percent to $8,195 on US-based Coinbase exchange.
Gold, a go-to haven asset in times of economic meltdowns, joined the bull party only this Tuesday after the price pushed to its nine-week peak of $1,334.10. The surge came after Fed Chair, Mr. Jerome Powell, issued what market believed as dovish comments amidst the rising trade tensions in the US.
"We do not know how or when these issues will be resolved," he said. "…As always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2 percent objective."
Comments from Mr. Powell hinted that Feds might loosen up its monetary policy, believes Mr. Royce Mendes, a senior economist at CIBC Capital Markets. He stated that the US central bank could lower interest rates if the trade conflict with China and Mexico persists. Excerpts:
"Since the last Fed meeting on May 1st, trade tensions have increased, causing concern among many officials that the outlook could warrant a rate cut if economic data deteriorate as well."
Mr. Boockvar predicted a similar scenario of Fed reducing interest rates. He stated that another rate cut would devalue the US dollar, which in turn could be bullish for gold. As for bitcoin, the Wall Street investor said the cryptocurrency is too nascent to become a haven asset like gold.
At the time of this writing, Bitcoin was trading at $7,995, down 16-percent from its 2019 peak.