Bitcoin: May Outperform As Fed Pivots To Ease Policy (Rating Upgrade)

Summary Liquidity from monetary easing is the main driver of asset prices, not just economic fundamentals or ￰0￱ is well-positioned to outperform in the next round of monetary policy easing, especially after a period of cooled ￰1￱ comparisons show that traditional assets like stocks and gold mostly mirror money printing, with stocks not significantly outperforming gold over ￰2￱ I see strong upside for Bitcoin, I recommend diversification and caution against leverage due to Bitcoin's history of sharp ￰3￱ my previous article on Bitcoin ( BTC-USD ) in January 2025, I argued that there were indications that sentiment for BTC was at a peak, and this was probably not the best time to buy BTC.

Indeed, BTC was relatively flat for most of 2025 compared to the large run-up seen in ￰4￱ 2024-25 price (stockcharts) However, I believe BTC is still on a long-term upward trajectory, and recent events provide a good catalyst for another move ￰5￱ particular, Federal Reserve Chair Jerome Powell gave a speech on August 22, 2025, with tantalizing hints, which many in the financial media interpret as opening the door to easing monetary ￰6￱ this article, I will discuss why I believe Bitcoin (BTC) may be the best-performing asset in this round of monetary policy easing. #1 Liquidity (i. e., money printing) is the key driver of asset prices We are living in a liquidity-driven era, especially post-2008 financial crisis, when governments around the world embarked on quantitative easing (QE) and other monetary experiments, which basically meant printing more and more money to fund higher and higher deficits as% of ￰7￱ deficit as% of GDP (FRED) A simple comparison shows this to be the case.

Let's look at the S&P (first chart below) and gold (second chart below). Let’s not consider extreme cases where an investor buys and sells at bottoms and peaks, but instead let’s take a look at some realistic examples: S&P 500 since 2000 (Macrotrends. net) Gold since 2000 (Macrotrends. net) Summary of S&P 500 index ￰8￱ performance Starting Year S&P 500 index S&P total returns*: starting year to 2025 Gold ($/oz) Gold total returns*: starting year to 2025 2004 ~1100 734% $400 762% 2006 ~1400 614% $600 475% 2012 ~1400 519% $1700 103% 2016 ~2000 287% $1200 188% 2025 ~6500 n/a $3450 n/a *Note that S&P total returns are calculated assuming dividends are reinvested based on this source (using 2004 as an example).

Gold total returns are calculated based on the gold price in 2025 compared with the gold price in the years listed above.). What’s the point of the comparison, you ask? The point is that assuming gold prices in the long run (i. e., over the span of decades) are a good reflection of long-term currency debasement through money printing, and I believe this assumption to be valid, then much of the vaunted massive gains in stocks are nothing more than just the result of mirroring money ￰9￱ of those magnificent tech giants and AI and globalization and everything have resulted in an S&P 500 that has probably only produced not much more returns than owning a bunch of boring gold bars.

What’s even more sombering is that the S&P 500’s price-to-earnings ratio based on average inflation-adjusted earnings from the previous 10 years, known as the cyclically adjusted PE Ratio (CAPE Ratio), is near a record high of 39, significantly above the 20-30 range it has traded in most of the past two decades, and even at such valuations, S&P has underperformed gold from 2004 to 2025. S&P 500 CAPE (multpl. com) To me, this long-winded detour means that the current market is liquidity-driven more than fundamentals-driven. Yes, there are some tech giants doing some cool stuff, and we have a lot more gadgets to play with than two decades ago, but stocks are mostly going up because governments are printing money rather than the economy becoming more productive. #2 Bitcoin has more room to go when compared with other assets When compared with other assets, Bitcoin still has more room to ￰10￱ Benchmark compared US stocks 1.

S&P 500 CAPE of 39, almost the highest on record ￰11￱ cap of other countries (e. g., Europe) Gold Cost of production: Gold is currently trading at double or more the AISC (all-in sustaining costs) of many producers; see details below BTC Market cap: BTC market cap of $2.3 trillion vs. gold’s market cap of $23 trillion). While US stocks have done well and can continue to do well for the foreseeable future, for those of us who have been around long enough, there’s always the downside risk to ￰12￱ the 10-year CAPE is at nearly 40, it suggests to me that investors should be cautious rather than make new bets that the train won’t ￰13￱ this together, and it starts to remind one of the anecdotes of the Japanese imperial palace being worth more than all the land in California during the late 1980s bubble.

Gold: Gold may be the best asset for the super long run in terms of ￰14￱ it’s trading at relatively elevated levels compared to, say, its cost of production as per the source below, and is not cheap compared to several years ago, when it was trading slightly above its ￰15￱ cost of production (miningvisuals. com) Bitcoin is arguably today’s gold, at least for many amongst the new generation of investors, who view it as digital ￰16￱ has two factors in its favor: Momentum: While the long-term prospects for Bitcoin are less certain (will people still treat Bitcoin as a store of value 50 or 100 years later?). Maybe or maybe not, even though gold will probably still be a steady store of value 50 or 100 years later, it is performing as an alternative store of value right now and can probably continue to do so for the next few years until something dramatically negatively changes how market participants view Bitcoin (for example, another crypto asset becomes more popular than Bitcoin, or market participants revert to more traditional stores of value such as gold).

But as of this moment and for the foreseeable future, Bitcoin still has momentum; witness how even Gucci recently declared it would accept payments in crypto in some ￰17￱ supply: Bitcoin's theoretical upper limit is 21 million coins, but it's already relatively close at 20 million coins mined as of the most recent ￰18￱ next " halving " is expected to occur 4 years later, but even without considering halving, 95% of all potential Bitcoin has already been mined, and essentially, Bitcoin has very limited new supply. A higher ceiling: Bitcoin's market cap is still relatively small ($2.3 trillion) compared to other stores of value, say gold ($23 trillion).

As long as Bitcoin’s acceptance amongst the investment community (and even as a payment method) grows and the market continues to be liquidity/money-printing driven, I could very well see Bitcoin become more "gold-like" - even if Bitcoin eventually becomes half as valuable as gold (i. e., a market cap of $11 trillion), that would still be a 400% increase versus the current $2.3 trillion market ￰19￱ to my “hold” rating in early 2025: In my previous article on BTC in January 2025, I suggested measuring sentiment for BTC using the Google search interest index : In the past 5 years, a Google search interest index of around 70-100 would suggest investors are overly bullish (most prominently seen in the circle in red below on the left in 2021, where the high search interest index was before the massive decline in BTC prices from $66k/coin in 2021 to $15k/coin in 2022).

Whereas index readings of 25-30 indicated cool sentiment and extended periods of at least several months coincided with BTC bottoming in late 2022 and moving upwards throughout 2023 and 2024. Q4-2025 index readings (circled in red below on the right) were at a peak, the highest since ￰20￱ hitting around 65 in November 2024, the index has fallen to 20-30 for much of ￰21￱ was the case in recent upward movements by BTC, a period of consolidation typically followed large gains, as shown ￰22￱ that these correlations are not perfect on a day-to-day basis, but for major peaks and bottoms, these are a good reference point: when investors show a high interest in Googling for Bitcoin, it's probably time to be cautious, and when investors have been less interested in Bitcoin for some time, then it may be time to consider ￰23￱ search index Bitcoin (Google) BTC 5 year chart (stockcharts) Now that what I believe to be overly bullish sentiment in early 2025 has been given some time to cool down, it may pave the way for further upside.

I would also prefer to invest in BTC compared to “alternative” methods such as investing in Coinbase ( COIN ) stock, as I discussed in a recent ￰24￱ to bullish thesis I think there are a few risks for BTC ： One is that investors may lose interest and chase other shiny new instruments. I remember how gold was epitomized by many investors as the only safe store of value in the early 2000s. A new generation of investors has grown up in an environment of crypto and memes rather than gold. However, this interest could shift if something else shiny and alluring comes ￰25￱ said, right now I don't see anything similar in the works, especially in the crypto ￰26￱ the 2022 bear market, there has been a flight to quality, reflected in Bitcoin's dominance (i.

e., Bitcoin as% of total crypto market cap), increasing from a low of 37% in 2022/2023 to 57-58% ￰27￱ dominance (coingecko. com) The other is that a severe monetary tightening and economic recession, both of which do not seem to be imminent, will cause holders of Bitcoin to liquidate their holdings for cash and restrict new money from flowing into Bitcoin. Indeed, this sounds far-fetched in the short run when policymakers seem intent on keeping the economy running hot, as American leaders are pushing the Federal Reserve to lower interest rates , but in the long run, it’s not as implausible as it ￰28￱ developed economies are all running massive deficits as a% of GDP, which means these economies are consuming way in excess of ￰29￱ some point, say when bondholders are no longer willing to fund such extravagance, consumption will revert to equal ￰30￱ find they need money to pay bills, and there’s no investable cash to throw at shiny memes and coins, and if this persists over a prolonged period, the public could lose interest in Bitcoin.

However, as policymakers are currently tilted towards lowering interest rates, the near-term risk from such monetary tightening in the next few months is ￰31￱ As usual, I would suggest diversifying (i. e., not putting all the eggs in one basket) across crypto and non-crypto assets, and by no means am I suggesting betting the farm on one asset; however, I do believe BTC has a good chance to be a market-beating investment in the next upward ￰32￱ said, I would caution against any leveraged move given that BTC has suffered immense drawdowns in the past few years during bear markets, and it’s always possible that the next bear move is around the ￰33￱ buying ETFs (such as IBIT ) or buying plain BTC through any reputable platform or broker should suffice for the typical retail investor wishing to gain exposure.