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Bill Gross on Bitcoin: Money’s Meaning Is Changing

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Bitcoin

Bitcoin is currently having an incredible performance. It has risen nearly 1,450% so far this year. On December 7, 2017, it hit a high of $16,858 and then pulled back some.

The S&P 500 Index (SPY) (SPX-INDEX) has risen 18.4% in the same period. The ten-year bond yield has fallen 2%, and the US dollar (UUP) has fallen 8.1% during the same period. Bitcoin has emerged as a popular alternative for protection against various risks.

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Financial system

According to Bill Gross, credit with higher ratings could act as money, provided “its liquidity, perceived return, and safety of principal allow for its substitution.” He said, “When the possibility of default increases and/or the real return on credit or liquidity decreases and persuades creditors to hold classical ‘money’ (cash, gold, bitcoin), then the financial system as we know it can be at risk (insurance companies, banks, mutual funds, etc.) as credit shrinks and ‘money’ increases, creating liquidity concerns.” According to Gross, the growing interest among investors to hold classical money in the form of bitcoin, cash, or gold could put the financial system at risk.

For more on bitcoin, be sure to read Billionaire Carl Icahn on Bitcoin: ‘Seems Like a Bubble’.

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