Bitcoin Hits High of $19,850 As Doubters Become Believers
2 min
Bitcoin soared to an all-time high on Monday, hitting US$19,850 in the morning before again slipping below US$19,500 by the afternoon.
It has nearly doubled in just the past two months. The cryptocurrency has been boosted by a flurry of endorsements from traditional investors, favourable government policies, and expanded access on investment apps, as Barron’s noted this weekend.
Even traditional investors who had long spurned or ignored Bitcoin have begun reconsidering. New buyers tend to view the digital asset as a hedge against currency devaluation at a time when governments have loosened monetary policy to deal with the coronavirus. It doesn’t bother many bulls that Bitcoin remains mostly useless as a currency. Its role as an asset appears to be enough.
Scott Minerd, the global chief investment officer at Guggenheim, appears to be warming to Bitcoin. The Guggenheim Macro Opportunities Fund (ticker: GIOAX), with more than $5 billion in assets under management, said in a regulatory filing that it may invest up to 10% of its net asset value in Grayscale Bitcoin Trust (GBTC), a stock-like security that tracks the price of Bitcoin.
Bernstein analyst Inigo Fraser-Jenkins, co-head of the portfolio strategy team, wrote on Monday: “I have changed my mind about Bitcoin’s role in asset allocation. In January 2018 we declared that it had no such role. But actually, maybe we have to admit it does. What has changed is the policy environment, debt levels and diversification options for investors post the pandemic.”
One reason that analysts are changing their minds about Bitcoin is that it may serve to balance portfolio exposure for some investors. Stocks are trading at high valuations, so it makes sense to hedge exposure to them. But bonds and Treasuries have also rallied, and are trading with such low yields that there’s not much reward for the risk that investors are taking on.
Gold has also risen in recent months and is trading near a 50-year high relative valuation to other commodities, according to Jim Paulsen, the chief investment strategist at the Leuthold Group.
Paulsen recommended on Monday that clients consider Bitcoin as a way to balance their portfolios. He is impressed with how uncorrelated it has been to other assets — both stocks and things like bonds and gold. “The thing is, Bitcoin has risks, but today, so do most of the other balanced portfolio alternatives,” he wrote.
He explained more in a follow-up email to Barron’s.
“I still don’t really understand what drives Bitcoin but I am finally willing to recognize that its short history yields some beneficial attributes which I can’t find elsewhere,” Paulsen wrote. “And, unlike other balance possibilities, I am not looking to ‘buy and hold’ Bitcoin (would need to understand it better to do that), but rather looking to exploit its excessive volume in order to improve the workings of a traditional balanced portfolio in a way which is not possible if utilizing only traditional assets. My point essentially is that I am not really attracted per se to Bitcoin fundamentally, but rather only its ‘interactive’ character (including its unique excessive volatility) with stocks and other traditional assets.”
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Continued stagflation and cost of living pressures are causing couples to think twice about starting a family, new data has revealed, with long term impacts expected
2 min
Australia is in the midst of a ‘baby recession’ with preliminary estimates showing the number of births in 2023 fell by more than four percent to the lowest level since 2006, according to KPMG. The consultancy firm says this reflects the impact of cost-of-living pressures on the feasibility of younger Australians starting a family.
KPMG estimates that 289,100 babies were born in 2023. This compares to 300,684 babies in 2022 and 309,996 in 2021, according to the Australian Bureau of Statistics (ABS). KPMG urban economist Terry Rawnsley said weak economic growth often leads to a reduced number of births. In 2023, ABS data shows gross domestic product (GDP) fell to 1.5 percent. Despite the population growing by 2.5 percent in 2023, GDP on a per capita basis went into negative territory, down one percent over the 12 months.
“Birth rates provide insight into long-term population growth as well as the current confidence of Australian families,” said Mr Rawnsley. “We haven’t seen such a sharp drop in births in Australia since the period of economic stagflation in the 1970s, which coincided with the initial widespread adoption of the contraceptive pill.”
Mr Rawnsley said many Australian couples delayed starting a family while the pandemic played out in 2020. The number of births fell from 305,832 in 2019 to 294,369 in 2020. Then in 2021, strong employment and vast amounts of stimulus money, along with high household savings due to lockdowns, gave couples better financial means to have a baby. This led to a rebound in births.
However, the re-opening of the global economy in 2022 led to soaring inflation. By the start of 2023, the Australian consumer price index (CPI) had risen to its highest level since 1990 at 7.8 percent per annum. By that stage, the Reserve Bank had already commenced an aggressive rate-hiking strategy to fight inflation and had raised the cash rate every month between May and December 2022.
Five more rate hikes during 2023 put further pressure on couples with mortgages and put the brakes on family formation. “This combination of the pandemic and rapid economic changes explains the spike and subsequent sharp decline in birth rates we have observed over the past four years,” Mr Rawnsley said.
The impact of high costs of living on couples’ decision to have a baby is highlighted in births data for the capital cities. KPMG estimates there were 60,860 births in Sydney in 2023, down 8.6 percent from 2019. There were 56,270 births in Melbourne, down 7.3 percent. In Perth, there were 25,020 births, down 6 percent, while in Brisbane there were 30,250 births, down 4.3 percent. Canberra was the only capital city where there was no fall in the number of births in 2023 compared to 2019.
“CPI growth in Canberra has been slightly subdued compared to that in other major cities, and the economic outlook has remained strong,” Mr Rawnsley said. “This means families have not been hurting as much as those in other capital cities, and in turn, we’ve seen a stabilisation of births in the ACT.”
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