200510 BTC Crash!

The recent run up in front of the “Halvening” has been notable. That said, I am not a big believer in these events. Bitcoin has inherent value. There are cheerleaders that over emphasize this. There are Eeyore’s that want to ignore the obvious. My take? Anyone that doesn’t own one half or more of a Bitcoin is making a major mistake! Stop looking at the news and the charts! Live life! Do your thing. Let BTC do its thing. Look at it in 2022. Don’t sell unless you are desperate and need some Fiat.

20200229 BTC Update

While Bitcoin remains in an uptrend, it is under severe pressure and has violated its trend and the expected counter trend consolidation. So, its bias is bullish, but with its well documented ability to lose huge percentages of its value very quickly, its currently a dangerous short term play to go long.

Full disclosure: I have a position in BTC in cold storage that I never consider trading. HODLers hold. Its what we do. Posts on this site are focused on shorter horizon trading aspects that may or may not get confirmed by future price action. God knows, not me. I was very surprised $9150 was violated, for example.

20200229 Fearing Fear itself

My thesis is that COVID-19 is an awful flu that is feared more for its unknown impact to the economy and everyday life than the actual disease impact itself. My approach to investing in this chaotic period is towards the bottom of post.

Markets hate uncertainty, and there is no historical model available to attempt to model the potential impact of this form of Coronavirus. Latest data suggests that container ships arriving in China was down 30% compared to same month last year. China is the worlds builder of “stuff”, and the US its best customer. The movement of that ‘stuff’ is clearly dwindling rapidly- which portends a significant global slowdown.

Lets look at rough numbers:

MarketChange from latest high:Why?
Dow Jones Industrial Average-13.80%Fear of unknown
Nasdaq Composite-12.50%Fear of unknown
Asia DOW Index-10%Fear of unknown
Nasdaq Europe-12.80%Fear of unknown
   
Gold-5.30%I don’t know
Silver-12.20%Fear of industrial demand drop
   
Bitcoin-19%Declines started before COVID Panic hit full force. Unknown why it hasn’t reversed. Seems to be a “sell anything with a Ask/Bid mentality”
Ethereum-23%
XRP-36%
LINK-15%

In theory, as the global markets turned south, Precious Metals and ‘Digital Gold’ should have appreciated in value. What we are seeing in all markets currently is a flight to liquid fiat. Concurrently, markets are expecting a Central Bank global intervention reducing interest rates. The world is already awash in paper money and its derivatives! No form of currency has ever cured a disease! This is a nonsensical, “lets do something to look like we are doing something” self distructive trap.

As indicated in Para 2, the world might be facing a Supply Shock of goods. Last one I remember was the 1973 Oil Embargo, the 1979 Oil Crisis and then the impacts of the Hunt Brothers trying to corner the Silver market in the late 1970s. Supply shock brings panic and reckless behaviors out in the most rationale of people. A supply shock in tandem with a flood of paper money is a recipe for an inflationary spiral. If inflation gets out of hand, most of the governments of the world to include the US will face an existential crisis. A huge portion of the US debt is in short term notes, so inflation will significantly alter its ‘refinancing rates’. A spike in inflation may become an existential crisis to fiat currencies on a global basis.

My ST investment Equity Market Strategy is to maintain my SQQQ and TECS (inverse ETF) positions. The market should bounce up before falling further and setting a bottom. This is not a time to be hoping for a “V” shaped bottom. It won’t happen. If you are not currently Inverse, its prudent to wait for a move up before betting on further drops. Assume that this weekend that all the global financiers and bankers are trying to plan a market intervention intent on pushing indexes up in order to soothe fears. I expect a move higher in equities starting Monday. Due to the never ending stream of bad news / COVID-19 Panic, that may not work.

My ST Precious Metals Strategy: (not physical here- market related assets like SLV, GLD, PAAS, JNUG, NUGT). I was stopped out of all of my PM positions in last 2 trading days. Gold: Anticipate continued weakness. Silver: Expect heavy short selling. Remember that in 2008, $SILVER futures were pushed down to $8. If silver gets anywhere near that level, I am backing up the truck & going all in.

Crypto: Wait and see from the sidelines. Will do a BTC, ETH and LINK update this weekend. Crypto is a hopeful asset, in that these assets are not fully established as legit and for the average Joe to put hard earned money in this seems a gamble. Since average Joe is getting more fearful by the day- lets assume that new money will be unlikely to enter this space in the short term and what we will be seeing is mostly current participants trading in and out of fiat in a zero sum game against each other.

BTC price projection 2/10-2/16

Bitcoin is executing an orderly uptrend. In the near term there are few red flags indicating a downtrend might emerge. Also, there is no evidence that a “moonshot” or parabolic spike is in the making anytime soon. That is good news. There are an increasing number of BTC bulls that are convinced that the next spike is imminent- at least according to a scan of YouTube click-bait.

The case for it not spiking and continuing to stair-step is that this is sustainable. The longer it is sustained, the better a launch pad it is for the next spike. In the last few weeks of the 2019 rally, BTC shot up 65% from $8k to over $13k. Not a parabolic spike, but a huge move. Problem was, it started from $8k and ran out of steam. If BTC had a 65% move from its current price ($9857 (02/10/20 UTC:1700)) it would reach $16k, which is a major resistance zone. Again, it would probably run out of steam and fall. Ideally it climbs past $13k before having a large gap- up. That would likely be sustainable rally to a new ATH.

I suspect BTC will again suffer a parabolic spike, probably in the next 12 months. It will happen probably like the last time- driven by FOMO once it rises significantly above its last ATH. Be aware- based on historical pattern its likely to hit a new ATH at least 20% above previous and then trend sideways / sightly lower for 3-9 weeks while it consolidates gains.