Bitcoin

Bitcoin pumped to $43K today, then dropped, and is back to pumping again.  At least it’s not all sideways price action.  When Bitcoin is consolidating and the US dollar index is strong as it has been this year.  It is good to look at the scarcity of Bitcoin to understand how this will end.  Bitcoin scarcity is extremely underrated!  This next chart shows what the miner reward in Bitcoin will be from the genesis block that was mined in January 2009, the reward after each halving, until there are no more miner Bitcoin rewards for mining a block on the blockchain:
 

The miner reward is 6.25 Bitcoin right now.  In the 2nd quarter of 2024, it will drop to 3.125.  As we state routinely on the blog a block is mined every 10 monutes on average.  After 210,000 blocks the miner reward halves again.  As inflation keep increasing, or after a stock, and real estate market crash, these halvings will increase the scarcity aspect of Bitcoin.  Over decades that will make an exponential difference in the price!  This is why it is critical to maintain a low time preference.  In other words, zoom out, and look at decade charts of Bitcoin.  We always use trading view to analyze charts.
 

Wednesday our blog discussed the SOFR and Libor rates differences.  Secured Overnight Funding Rate has been established to compete with LIBOR rates from Europe.  The chart below shows 2021 and previous SOFR rates in the yellow line, current 2022 SOFR rates in the blue line, and 10 yr treasury yields in the black line: 

 

 

The SOFR rates this year are moving 10 yr treasury yields and the Federal Funds Rate.  This has been effecting the DXY chart in 2022.  Effectively, keeping the dollar strong and slowing down the Bitcoin bull run.  
Tom Luongo’s article about SOFR vs Libor, here is the link for a reference.

 

All in all, this has made 2022 an interesting year.  In our opinion, IF the Bitcoin spot ETF comes out this year, Bitcoin will recover very well.  If not, it could be a tough year!  We are NOT alone in this opinion.  The futures ETF has been out since Spring 2021 and has only given derivative markets the ability to tamp down the Bitcoin price action!  If a spot ETF had come out at the same time last year, this would NOT be the case right now! 
 

Grayscale CEO Michael Sonnenshein:

“If the SEC can’t look at two like issues, the futures ETF and the spot ETF, through the same lens, then it is, in fact, potentially grounds for an Administrative Procedure Act violation.”
 

Jake Rappaport of Nasdaq, Head of Digital Asset Index Research:

“As demand continues to surge, advisors will be looking for an institutional solution to the crypto question that now dominates client conversations.”
 

Last week we reported that 72% of institutional investment clients, would go into Bitcoin if a spot ETF was approved by the SEC.  We also have been mentioning for weeks that sovereign wealth funds in UAE, Qatar, Saudi Arabia would invest 2% up to 4% into Bitcoin if a spot ETF were available.  This could eventually 10X the Bitcoin price.  Yet, we STILL do not have a spot Bitcoin ETF.  That, is what will break this accumulation phase wide open!  
 

This next chart is interesting, in that it shows the coorelation between Bitcoin price action and energy value.  Recall, in a blog last week we mentioned ASIC’s miner shipping delays from the raw material shortage and shipping container issues.  ASIC’s delays happened to a greater extent in 2013, which may have contributed to that cycle’s double top.  In 2021 and 2022, the delays are exponentially more severe.  It is still yet to be determined how that will impact this years bull market cycle:
 

 

Whenever Bitcoin does hit the top of the accumulation ascending channel we have been trading in all year.  What it does next will decide how 2022 turns out.  That will likely come in May.  Should be an important month.  This next chart from Crypto Zombie, shows this 4 month accumulation phase we are in, to be equivalent to the March 2020 lows below $4K!:

 

 

Then, look at the comparison in this next chart between Bitcoin and the DXY index.  They are obviously inversely related.  As the DXY has dropped, Bitcoin surges.  As the DXY has rebounded, Bitcoin accumulates and drops.  Now we see a double bottom for Bitcoin and the DXY is at 100 and has found resistance it has not broken in years now.  With the CPI at 8.5% and climbing fast.  Can we really expect the DXY index to keep climbing?  We say no!  It has to turn eventually.  That may be at 100 or 102 or 104, but it will happen at some point.  That will be the point at which Bitcoin can go on a run again.  The last time the DXY found major resistance at 100 or so, it dropped to 89.  Bitcoin pulled a 10X!  That was spring 2020 to spring 2021.  See the chart below:

We also know that ascending channels are bear flags, and Bitcoin could roll over.  Not, however, if the DXY has also rolled over.  So watch the DXY index for the next few weeks.  It could be very telling!  We are not financial advisors and this is not financial advise.  Keep a long time horizon, hold Bitcoin and wait.  We know the dollar index will roll over eventually!
 

Neutral ATM is here to get everyone off of zero Bitcoin. 

 

Give Neutral ATM a try.  We have low rates, convenient locations and we are expanding. Contact Neutral ATM, we will answer all your questions about Bitcoin and using our ATM machines. Find a Neutral ATM Bitcoin machine location near you.