Bitcoin Dumped to the Bottom of the Support Channel!
IT HELD! We need to see a reversal now! Wait for it! This is the channel it is in, and the support channel is in the chart below, from yesterday:
Here is where it is today:
There was a wick to $37,775. Now its $38,474. If Bitcoin pumps somewhat today from this level and closes higher. Look for another attempted break out from this descending channel which is 70% of the time, a bullish chart pattern. A dump to the support channel is not an end of the world scenario. Shorts are high amongst the open interest total. They can get liquidated. This is cheap Bitcoin!
Long term, look at the bullish news for Bitcoin. Google digital cards will allow customers to store Bitcoin and spend fiat, click here to read more.
See the chart below for all millennial portfolios. They are majority Crypto, which is dominated by Bitcoin. NFT’s, Metaverse, and Defi are also significant in Millenial portfolios. That generation is leading the charge to a digital economy. See this chart:
We have written about Metcalfe’s Law. The one thing holding it back from plunging Bitcoin into a parabolic run up to the bull market cycle top, is a lack of price action to kick off the network effect. The network effect is made up of consumers, merchants, miners, and entrepreneurs.
Miner capitulation is estimated to be at $34,000 at this time. Above that level, miners will hold Bitcoin 100%. Until miners capitulate, it is VERY likely, Bitcoin remains in a bull run. Here is Marc Andreessen on the network effect of Bitcoin, click here to view on twitter.
At this time we know the support channel held, Bitcoin is now $4,702 away from the miner capitulation level. Thus, the likelihood for a breakout, is high! Don’t panic!
This chart below is CPI year over year vs ZEW US inflation expectations:
Since 1995 CPI has never come close to 7%. If you read our blog much at all you know real inflation is 14% to 20% depending on US geography. M2 money supply was discontinued by the Fed as a means to track money supply. It’s obfuscation, from the facts. Expectations are for continued inflation. The Fed claiming a hawkish stance on rate hikes sounds good. Yet we know the Fed is trapped. Politically they cannot afford the 50 bps quarterly rate hikes they will need, in order to slow down inflation by 2024. The mid terms are November 2022. There is no political will to destroy the economy over the next 10 months leading up to mid term elections. 50 bps per quarter will do just that. Look at how the indexes have reacted to the mere mention of rate hikes!
The FOMC meeting next week will be huge! The ECB has predicted 4.5 rate hikes for 2022, and below is the Eurodollar futures index, pricing it in at this early stage:
If the Fed comes out more dovish (25 bps or less for the March rate hike), after hawkish announcements this week, Bitcoin longs will prosper! The shorts on futures open interest could begin a cascade of liquidations. This could kick start the network effect and Metcalfe’s Law. Futures open interest is at 20 month lows going back to March 2020. Remember what happened after that sell off? Bitcoin went from $3,850 to $64,829 in 13 months!
At some point either longs or shorts on the derivative markets, will start a cascade. The only question is which way will it go? Since we know the support held. How can we assume anything but a cascade of short liquidatioins will transpire, at some point? This means that derivative contracts that bet on a short (Bitcoin dumping), will be liquidated when Bitcoin goes the other way. It is beginning to do that RIGHT NOW. $38,753 Bitcoin price right now! Do not panic, Bitcoin will be well over $40K and then $50K in the future. Perhaps February. Who knows on the exact timing. Just remain calm, keep stacking. Store your Bitcoin offline. Trezor.io or Coldcard.com are the two best resources for offline wallets.
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