Edition 8.9.2019

Bitcoin is up over $200 per coin today to over $11,800 as disturbing news from the UK and China may be causing some consternation among some investors and moving some investors into digital currencies.  We can not see directly how many people are buying and selling and for what dollar amounts, but we can observe pricing activity.  And, generally, economists such as myself assume that when prices are going up there are more dollars bidding for an asset (wanting to buy it) than there are dollars wanting to offer, or sell, an asset. 

So, in the midst of China’s reporting that food prices in July were up 9.1% higher than in the year-ago period and the UK’s reporting that its economy shrank 0.2% in the second quarter (April 1-June 30) versus the same period in 2018 (CNBC.com), we see that Bitcoin is up almost 2% in the last 24 hours (source: Coinmarketcap.com). 

Of course, some digital currencies are down 4%-7% today, so trading activity may be from one set of digital currencies into a different digital currency; however, with the news of very high food inflation in China, on the back of China’s saying it plans not to buy US agricultural products for the foreseeable future, and that fears surrounding the October 31 Brexit (Britain’s leaving the EU) may be effecting the economy there, we also observe that some investors may be looking at these events and seeking non-correlated assets such as gold and digital currencies.  Gold investors today left gold prices basically unchanged as they took in the prospect of a slowing economy (and thus, less likely inflation) in the UK but also already-arrived high food inflation in China. 

All financial markets are moved by rational buyers and sellers and both the buyers and sellers think they are right. As we say on Wall Street, “that’s what makes markets”.  In this case, it seems investors of Bitcoin are looking at these events and more dollars seemed to have flowed INTO Bitcoin today than dollar flowed out of it today.   

Tim Shaler is Chief Economist of iTrust Capital.  He is a published Real Estate economist, was a portfolio manager and asset allocation expert at his previous firms and is an adjunct professor at Webster University. His MBA (Finance) and MA in Russian Economic History are both from the University of Chicago.

For all media inquiries, please contact Blake Skadron at b.skadron@itrustcapital.com