American billionaire investor Stanley Druckenmiller warned the U.S. economy will slip into recession next year, and said that he would rather “own more bitcoin (BTC) than gold” amid rising inflation.
Druckenmiller, founder of hedge fund Duquesne Capital, also said “we are six months into a bear market…it’s highly probable that the bear market has a ways to run” and that the stock market rout was not over just yet.
Speaking at the virtual 2022 Sohn Investment Conference last Thursday, Druckenmiller said most indicators pointed toward an economy heading south.
“Inflation has never come down without a recession and I think a recession is in the cards,” said the billionaire, in an interview with Stripe co-founder John Collison.
Last week, the U.S. Labor Department reported that the annual inflation rate rose to 8.6% in May – its highest level since 1981.
“Given the extent of the asset bubble and the destruction in the markets; given what’s going on in Ukraine, given the zero Covid policy in China…I strongly assume we are going to have a recession sometime in 2023,” Druckenmiller predicted.
Druckenmiller prefers BTC to gold in inflation bull market
The 68-year old investor, who together with fellow billionaire George Soros, is credited with pioneering an investment strategy known as “macro trading,” was asked whether the crypto industry had started to affect other asset classes.
“I don’t know whether I’m seeing it but I expect it to,” he explained. “You can’t build over $2 trillion in wealth in purchasing power and then take $1 trillion out and not matter. There certainly seems to be a strong correlation between crypto and the Nasdaq so I’m looking at that as an indicator that way.”
Continuing, Druckenmiller, who boasts an estimated net worth of $10 billion, said:
“I will be very surprised if blockchain isn’t a real force in our economy say 5 to 10 years from now. I find crypto interesting and I’m monitoring it. If we are going to have an inflationary bull market I would want to own more bitcoin than gold, but if it’s in a bear phase for other assets, you want to own gold.“
Druckenmiller’s comments followed close on the heels of similar sentiments by another hedge fund billionaire Ray Dalio, who reiterated that “cash is trash” and equities “trashier.”
The Bridgewater Associates founder said he preferred “a digital gold like bitcoin” instead.
Bitcoin as digital gold
Bitcoin has drawn comparisons with gold, and the top crypto asset is now accepted in some quarters as gold’s digital equivalent.
In 2020, many people believed bitcoin was poised to transition from a risk-on speculative asset to the crypto market’s version of the metal after its correlation to gold jumped to an all-time high.
Indeed, that argument may have started to fall apart with the massive decline in crypto markets this year. Reports by Bloomberg revealed that BTC’s correlation to gold dropped to almost zero earlier in January, and as bitcoin prices fell in later months, gold continued to rise.
In April, the 50-day correlation coefficient for BTC and gold was around minus 0.4, the lowest since 2018, Bloomberg said. A reading of 1 implies assets are moving in lockstep, while minus 1 is the reverse.
Crypto markets have become more tied to the stock market instead, particularly to blue-chip technology stocks such as Apple, Amazon, and Microsoft. Over $1.6 trillion has been wiped off the face of crypto markets so far this year.
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