6Aug 2019

Bitcoin – a Macro Perspective

by Henrik Andersson

As of late, one of Bitcoin’s properties in particular, its scarcity, is increasingly coming into the limelight. Unlike Gold, we know Bitcoin’s supply coming to the market. Gold is an asset of limited supply but its supply curve looks distinctly different than Bitcoin’s:

Schematic view of the supply curve of Bitcoin and Gold.

Schematic view of the supply curve of Bitcoin and Gold.

In fact while more and more Gold is found every year, less and less Bitcoin will be mined over time. While we don’t know the amount of Gold in the universe, anyone running the Bitcoin software can verify that no more than 21 million bitcoins will ever be created. This is what we mean when we say Bitcoin is a hard asset, it is hard to create, and it will only get harder.

Right now the world is going through a global easing cycle, meaning that as central banks are cutting rates around the globe, more fiat currency is printed. This will likely create an increased demand for hard, scarce assets that can’t be inflated such as Gold, land, real estate and Bitcoin.

A record amount of debt is currently trading at negative interest rates. While Albert Einstein has been quoted as saying “the power of compound interest the most powerful force in the universe”, the bond market will have to learn the power of negatively compounding interest.


Gold and Bitcoin might be attractive as the world is entering a new wave of global easing as they will never pay a negative interest rate. However, importantly, Bitcoin is also gaining another quality that Gold has — that of being a risk-off asset.

I believe there are behavioural learning cycles that the market goes through to find these risk-off assets. Japanese Yen is well known to be a risk-off asset despite Japan having one of the highest (public-)debt levels to GDP in the world. However, every time that there is a flight to safety the Yen will appreciate in value, and because it has done that in the past investors know it is likely to behave the same way next time. This learning pattern after awhile becomes self fulfilling. I believe the same thing is happening to Bitcoin at the moment.

This is what happened when President Trump threatened to increase Chinese tariffs last week:


A trade war means lower growth, thus the yield on US 10 year government bonds (US10Y) went down. Lower growth means lower demand for oil, thus crude oil (WTI) fell. Stocks, S&P 500 (SPX), fell dramatically. Gold traded up and Bitcoin traded up the most. The Japanese Yen (JPY) is not in the graph above, but the Yen strengthen as well.

Today’s (Aug 5, 2019) big macro story is that the Chinese is warming up to the idea of using the Yuan as a weapon in the trade war with the US. The Chinese Yuan reached a level against the USD not seen in over a decade:

Aug 5 global macro turmoil.

Aug 5 global macro turmoil.

Again Bitcoin (and other crypto assets) is the high beta risk-off asset. Gold and JPY are also higher but not to the same extent.

To conclude;

  1. Bitcoin is a hard asset, in fact much ‘harder’ in terms of scarcity than Gold as the supply has a strict cap at 21 million.

  2. More macro driven cycles like the above examples and the market will have taught investors that Bitcoin should be among gold and JPY as a risk-off asset.

We believe the global macro climate with easing and a flight to risk-off assets is a good backdrop to being in crypto assets in the short to medium term and wouldn’t be surprised if we wake up to more headlines like the below in the coming months.

Henrik Andersson

Henrik is the Chief Investment Officer at Apollo Crypto and is the fund manager for the Apollo Crypto Fund. He also acts as the fund advisor for the offshore Apollo Crypto investments funds, the Apollo Crypto Frontier Fund and the Apollo Crypto Market Neutral Fund. Henrik's expertise in traditional financial markets comes from spending a decade on Wall Street as a vice president in institutional equity sales. His exceptional understanding of DeFi comes from co-founding two successful DeFi protocols, mStable and dHEDGE.