Fidelity macro expert Jurrien Timmer says a Fed return to lower interest rates could fuel new bull markets for gold and Bitcoin (BTC).
Carpenter points to his 162,000 Twitter followers that gold and Bitcoin have outperformed virtually all other financial assets so far this year.
He says an economic scenario could develop where the US government decides to lower interest rates to make it easier to deal with its debt.
According to Timmer, a Fed pivot could hurt the dollar and push BTC and the precious metal skyward.
“If the country urgently needs lower rates to pay off its massive debt burden, it could undermine the Fed’s autonomy. In such a scenario, it would be easy to see the dollar weaken and push real interest rates again. That would trigger two of gold’s main drivers. And if Bitcoin is gold’s high-octane cousin, it makes sense for Bitcoin to be with it.
History shows that when debt becomes excessive, that debt must be devalued or outgrown by rising nominal GDP (gross domestic product). The 1940s were a useful history lesson in that regard. Below-market rates may once again become the lowest hanging fruit for policymakers on both sides of the aisle looking to maintain purchasing power in an era of rising debt. Maybe this is what gold and Bitcoin are telling us.”
Timber too say that the Fed has historically been “moderately restrictive” when it comes to monetary policy. However, the macro expert believes that inflation is already receding, suggesting a Fed pivot could be near.
At the time of writing, Bitcoin is trading at $26,845.
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