Back in 12/2017 when bitcoin surged to reach what would be its then all-time high of just under $20,000, a huge number of then industry of experts calling bitcoin the biggest bubble in history were making headlines on CNBC etc. These bubble-callers were vindicated for a few years, little did they know that just three years later what they thought was the biggest bubble ever, would be surpassed 2+ times over with bitcoin now more than double its 12/2017 then all-time high on the back of global central bankers injecting over $1.34 billion of free flowing extremely cheap money/liquidity in the market each and every hour (as insane as it sounds). What is behind this epic move...with the FED now openly manipulating and depressing interest rates/yields and the CPI a “BS” useless, politically motivated indicator, bitcoin has emerged “hyped” as one of the last remaining accurate inflationary metric available to traders (perceived not reality). But that is what Wilson stated:
One of my forecasted mega surprises of 2021 will be higher inflation (and the implosion of the Bitcoin bubble) as inflation will be far nastier than many even thought possible, including the FED, expect. Currently, the consensus is expecting a gradual and orderly increase in prices as the economy continues to recover. However, the move in asset prices like Bitcoin and other Cryptos suggest markets are starting to think this adjustment may not be as gradual or orderly as expected. With global GDP output already back to pre-pandemic levels (fuzzy math at its best) as most expect GDP next quarter to soar to 5.0-6.5% Wow, figures never lie or they never misrepresent the underly picture right? for a 5-6.5% reading we would have to have a red-hot economy right....(wrong) (😊) I see it at 2.75% at best however as we have new DEBT as far as the eye can see...King Trump signed into law the $1.4 trillion fiscal 2021 appropriations and the $900 billion Covid-19 relief deal Congress approved week...remember my friends that the equation for calculating GDP is: GDP = private consumption + gross investment + government investment + government spending + (exports – imports). For the gross domestic product, “gross” means that the GDP measures production regardless of the various uses to which the product can be put to use!
Our economy not yet even close to fully reopened, I think the risk for more massive price spikes is greater than anticipated (vis a VIX at 20.00-22.00). That risk is likely to be in areas of the economy where real actual supply may have been destroyed and the markets have priced in a light-switch scenario (that the economy will come back to pre-Covid-19 levels, like flipping a switch, I do not see it as so) as such the markets and participants are ill prepared for what could be a lackluster surge in demand at best into the 3rd and 4th quarters later this year!
we could see a huge disappointment [especially if the
vaccines do not deliver as promised] with restaurants, travel, and other
consumer/business related services...inflation could act like kryptonite for
longer term duration bonds which would have a near-term negative impact
on valuations for stocks should such a negative adjustment happen without
warning and rather abruptly...
As a result of the violent inflationary price action these
past months (hardly reported on by the financial media) past two months, bitcoin
has surged almost 190%, with the cryptocurrency market now greater than $1
trillion (insane JMHO) as Bitcoin has blown-the-doors-off its prior bubbles.
And just in case you are more visual than most and need visualization, here is
how Bitcoin is now the mother of all bubbles.
Bitcoin’s recent performance basically dwarfs the 1999-2000
technology bubble the Bitcoin run has drawn comparisons to the dot-com bubble
of the late 1990s. While the sentiment and underlying forces of both bubbles
may be similar, their performance is a different story.
At the beginning of 2015 only 6-years ago, Bitcoin was trading
just above $300 (I wish I had been a buyer).
In early November this year, the Bitcoin price rose above $7,600. That
translates to returns north of 2,200% in a matter of 1,041 trading days (a
great return by any standard right). By comparison, the Nasdog was up 391%
after 1,041 trading days from the start of 1995. Returns on the Nasdog peaked
just shy of 1,100% after 1,326 trading days.
Bitcoin’s run has far outpaced the 1995-2000
technology bubble, and its returns have already dwarfed dot-com mania. Now,
crypto advocates argue that Bitcoin has transformative fundamentals, so the
returns are justified (I laughed when I wrote this). See I do not deny that
blockchain is a transformative technology that will eventually revolutionize a
segment of the finance industry. But the mainstream adoption of the internet in
the 1990s was a massive paradigm-shift then as well. The widespread adoption of
any so-called transformative technology has massive ups and downs and takes way
more time than folks think it does not happen overnight.
Bitcoin has tripled in value this past year “2020”, growing steadily even as the stock market plunged in the early days of the Covid-19 pandemic. Investors have been drawn to it like moths to a flame (they will fly to close to the flame), as well as other cryptocurrencies have all rallied as the US dollar has significantly weakened. With the FED expected to leave interest rates near zero for several more years, bitcoin has been winning new followers.
This is not bitcoin's first significant spike Bitcoin has seen. It had a strong run in 2017 and hit a then-record high of more than $20,000. But its price plummeted to just over ~$3,000 by early 2019 as China continued its crackdown on cryptocurrency. It then rebounded to ~$8,000 in May 2019. It soared past ~$20,000 in December, climbing rapidly in the past month into year’s end...and now it has gone more than parabolic!
Bitcoin fans are extremely adamant that the recent price
rally has just started its moon-shot higher. From a technical standpoint, this
current rally certainly appears to have gone vertical/parabolic. I believe
failure at the new current highs would represent a clear technical divergence
pattern between price and its RSI.
Additionally, the current giddy
locoweed induced rally that started on December 20th consisted of a
massive $10,850 rally cycle. The previous rally from October 20th to
December 2nd consisted of another huge $9,200 rally phase. I believe
this current rally phase from December 11th could be an E-Wave “5”
rally (almost equal to the E-Wave “3” rally range).
If my technicals are correct, this
final rally cycle could come crashing downward after reaching these peak levels
(or it could stall right here) the level comes in at $47,150 (likely capped at $47,750-$48,400).
My Bitcoin chart highlights the incredible price rally that has taken place
over the past 3+/- weeks. It also highlights two clear price rally phases
creating an A-B-C price wave pattern.
My daily Bitcoin chart highlights the two, almost identical in size, which has created a possible price peak top above $40,750. It also highlights the technical divergence between price and its RSI indicator in the lower pane. I believe this current peak may become a near term top in Bitcoin possibly resulting in a serious downward price correction Bitcoin has only solid technical support near ~$20,500 to ~$22,500. If Bitcoin prices collapse from the recent peaks.
Interestingly I have heard hardly a bearish remark about
bitcoin, or a bullish comment [expect from myself] on the U.S. dollar in weeks.
Investors and speculators are clamoring for any dollar replacement asset without
regard to price or risk; something similar to what we saw in March 2020, but the
actions were reversed; traders were fervently selling any asset they could find
to hold cash. The charts and sentiment readings (which are extremely high) suggest
the cash is trash mentality might be running on vapors. If I am right
and I am betting that I am with my money (As I am SHORT GBTC & RIOT),
things will look significantly different as we progress into the weeks and
months ahead than they do today. I would not expect to see risk assets crashing
down to retest the 2020 lows immediately; (I am referring to the S&P 500
near 2,190, crude oil under $10 etc.
Nevertheless, the speculative froth in these markets is
reaching ridiculous heights and perhaps the most obvious display of this is the
parabolic bitcoin frenzy / fever.
I have noticed that gold / silver and bitcoin generally trend follow each other but when the trends reverse it usually starts with gold then the action bleeds into bitcoin. With gold failing to break overhead resistance this past week after turning down from its August 3rd (2,072.30 highs) and the U.S. dollar trying to hold support (DXY at $87.50-88.30) the risk of being long and wrong in bitcoin is quite real. Also according to sentiment readings on the greenback only about 17% of market participants are bullish on the greenback, which is usually a sign of an very overcrowded belief. What would risk assets, particularly bitcoin, look like if the dollar ralls from here?
Remember my friends...You do not
have to be in the know or massively smart to make money 😊 in the stock market;
you just need to think differently. That means I do not equate an parabolic “up”
market with a “healthy” market and vis versa all markets present opportunities
to make decent money!
Gold is under pressure even while record highs have been established in both bitcoin and the Dow as we have seen that Gold prices have fallen below key levels ($1,900 per ounce) and investors would like to know which assets are likely to outperform as safe haven assets in 2021 (JMHO). Gold was trading under pressure (since topping in August 2020) as stock markets make new highs and market valuations in bitcoin surge to levels that many thought-were-impossible. Adding support to my bearish premise is the uptick in yields seen in the U.S. Treasury market. Yields on the 10-year note have made a clear break above the lower highs that were established in June 2020 and this is a critical factor that must be monitored by precious metal investors this is important because rising trends in Treasury markets often serve as an pre-indicator of potential weakness in precious metals as the sector remains woefully deficient in terms of its ability to generate investment yield.
These trends can be viewed as another market surprise indicator
given the recent rise in Covid-19 deaths (over 4000 a day) that has
emerged following the holiday season and As I have remarked global lock-down
measures are unlikely to have much of a near-term impact if workers cannot
afford to follow such restrictions. It is highly unfortunate the macroeconomic
picture has not helped matters and the latest U.S. labor report shows that job-growth
has reversed for the first time in April as the U.S. is facing a huge net jobs decline of 10 million since February and this comes after the implementation
of a mew paltry $600 stimulus check being sent out which will likely have an
insufficient impact on the country’s consumer spending activity. In essence, these
worse-than-expected jobs reports interestingly failed to inspire significant
gold buying activity and it now looks as though the upcoming potential for more
stimulus packages “bailout giveaways” might be the next driver of gold prices
as has the massive increase in the money-supply!
For precious metals traders, this is important because of the effects these possible outcomes might have on future money supply. Since February, M-2 money supply in the U.S. has taken off like a rocket ship reaching levels above $19 trillion in November 2020. If these trends continue, we are likely to see sustained arguments supporting the bullish prospects for gold and silver because these are the assets that have traditionally provided market protection from these types of economic pressures in the past.
So, is bitcoin's massive liquidity-fueled explosion here to stay for good? I cannot say with 100% assured as anyone who claims otherwise is a liar and a charlatan, but all my technicals and fundamentals are flashing “Danger-Danger Wil Robinson” as there are growing liquidity warning signs explaining that the contrarian bear catalyst in 2021 will be rates not profits (also a likely bullish rebound in the greenback), so keep an eye on early warning signs that rates are turning bearish for risky assets!
Inflation in the real world is all around us: inflation
spook the FED and balance sheet bulls (food prices at 6-year highs, up over 20%
in the past 8 months alone, then there is energy inflation and durable good inflation
and house/rent inflation)
The bursting of the bubble remains
the biggest risk to the bullish premise, the as the 12+/- years associated with
a massive backdrop of maximum liquidity and technological disruption has caused
maximum inequality & massive social and electoral polarization…and value of
US financial assets have soared (Wall Street) now stand at almost 6.2x the size
of real GDP.
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