Renowned macro investor Luke Gromen has identified a crucial turning point that could potentially propel the value of both gold and Bitcoin.
According to a report by The Daily Hodl, in a recent discussion on Blockworks Macro, Gromen expressed his belief that Bitcoin and gold are poised for success regardless of the outcome.
Gromen suggests that the moment the market senses the US government’s intent to print additional dollars to manage its national debt, Bitcoin and gold will likely experience a bullish trend. He warns that an excessive increase in Federal Reserve rates could lead to a financial crisis for the US government. According to Gromen, this scenario would be highly favorable for Bitcoin and gold.
While he acknowledges that the US government is unlikely to face nominal bankruptcy, he believes that the Federal Reserve will have to print the difference, or the US government will have to step in. This realization by the market, coupled with persistent inflation and the need for further rate increases, could lead to a situation where printing more money is the only viable solution to meet interest payments.
Gromen also considers the possibility of the Federal Reserve maintaining its stringent monetary policies. In this case, he predicts a temporary setback for gold and Bitcoin. However, he argues that the escalating national debt will eventually compel the Federal Reserve to change its approach, which would be a positive development for these store-of-value assets.
If the Federal Reserve refrains from printing money, Gromen warns of a potential crowding out of global dollar markets by the US government. This could initially exert pressure on gold and Bitcoin, but he believes that the ultimate outcome would be a market realization of a potential US government default:
“However, if the Fed does not print the money, then as paradoxically given the dollar’s incumbent role as (the) reserve currency and the dollar borrowings out there, the US government is going to crowd out global dollar markets…
“And the dollar will go up, and that can put some pressure on gold and Bitcoin in the short run, but ultimately, from there, the distance point is, ‘Okay, the Fed does not print it enough, and the US government heads towards default,’ and you will get to a moment where markets go, ‘Oh gosh, they could actually default.’ And that ain’t bad for gold and Bitcoin in my view.”