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Kelly Evans: Bitcoin, gold, and the dollar

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CNBC's Kelly Evans
CNBC

Dizzy yet from the action in Bitcoin lately? I know I am.  

No sooner were we gearing up to cover the cryptocurrency's dramatic Thanksgiving drop than it reversed course and shot higher again.  

It was already on the rebound this morning but really shot up after the Winklevii (twins and early Bitcoin believers Tyler and Cameron Winklevoss, as they're affectionately known to traders) were on Squawk Box saying they think Bitcoin will rally 25x from here and be the best performing asset of the 2020s.  

Interestingly, their rationale is similar to what Bill Miller has been saying for years about his own bull case for Bitcoin. He reiterated his bullishness on our show three weeks ago, just before the crypto's latest leg higher. Miller has long said that if investors start treating Bitcoin like gold, its value could skyrocket just from becoming a small portion of every typical investor's portfolio.  

Tyler Winklevoss said essentially the same thing this morning: "Our thesis is that Bitcoin is gold 2.0, that it will disrupt gold. And if it does that, it has to have a market cap of $9 trillion...[or] $500,000 a Bitcoin," up from roughly $18,000 today--and that's how he arrives at his 25x rally call.  

Now, I don't know exactly how he gets at the $9 trillion figure, but this is essentially what a lot of the investors today are doing as they turn bullish on Bitcoin--realizing that if everyone else buys it, its value will go up. It's why macro strategist Raoul Pal pounced at the significance of Stanley Druckenmiller--on our show the day after Miller--also warming up to Bitcoin: "The significance of the worlds greatest and most respected money manager...saying just now that he is long bitcoin can not be overstated. That has removed every obstacle for any hedge fund or endowment to invest."  

And if you're an institutional investor, why not pile into Bitcoin now? You have the cover of Druckenmiller, Miller, and others who are legitimately respected investors saying it's not a goofy or insane thing to do. Its gains this year have been tremendous; from under $7,000 in January to $19,500 as I write this. You put a few percentage-points of your portfolio in Bitcoin and even if it goes to zero (which Miller said is now "less and less likely"), you probably won't get fired over it. And if it keeps shooting higher, you're a genius.  

And if all of this sounds like a high-tech version of the "greater fool" theory, well, we're about to see just how far it can go. In fairness, Miller and others have fundamental reasons for liking Bitcoin too--simple supply and demand. If there can truly never be more than 21 million created, and now every investor wants in, there you have it.  

Now, I mention all this to also explain what some think is going on with gold. While Bitcoin has been back to nearly all-time highs ($19,921 I think is the high-water mark from a few years ago), gold has been sinking. It's on pace for its worst month in four years; it's also the most oversold its been since 2018, per Peter Boockvar. This flies in the face of the dollar's own weakness; we're on the cusp (if the DXY index breaks below 88.6, another three points down from here) of nearing six-year lows.  

Remember, dollar down means everything priced in dollars and traded internationally should go up to keep its external value the same. Stocks, copper, silver, gold, Bitcoin--you could even argue U.S. housing prices. Anyway, all of these have indeed been rising, except gold. Boockvar says it may be a "risk-on" reason; people selling their safe havens as the 2021 outlook brightens. Others cite Bitcoin, saying investors are indeed now selling their traditional gold to buy "gold 2.0."  

But a third possibility is that Jefferies strategist Dave Zervos may be proven right; he's pretty much the only person I know saying the dollar will at the very least be supported and could even rally from here. We had him on a couple weeks ago to explain (full video here), but basically he says the "hand-off" from government support to a self-sustaining recovery means real interest rates will rise, in which case "the dollar will be supported, gold will lose its luster, [stocks] will benefit and the yield curve will steepen." And indeed these things have been starting to happen, in fits and starts. 

 So put it all together, and what do you get? A scenario where stocks can rise whether or not the dollar keeps weakening, gold is a dicier call, and Bitcoin is in a world of its own driven by herd investing and its own supply and demand.  

See you at 1 p.m... 

Kelly

Twitter: @KellyCNBC

Instagram: @realkellyevans