Bitcoin; Patience Required!

This zoomed out chart of Bitcoin going back 10 years.  Shows us how bullish the last decade in Bitcoin has truly been.  It may be extremely volatile, but if one can hang on, it is the greatest store of value in financial history. Bitcoin could make an epic run in 2023 through 2025.  Here is the chart below:

 

 

Another aspect of Bitcoin that is key to remember in bear markets, is the purchasing power it holds.  $1 invested in Bitcoin 10 years ago, buys $10K worth of goods & services.  Holding $1 of USD over 10 years buys about $40.  Once inflation is factored in, the dollar is losing buying power while Bitcoin is gaining it.  Here is the chart:

 

 

CNBC was reporting that Government websites were comparing the cost of eggs in USD vs BTC a few days ago.  However, the above chart is easier to grasp.  

If the hash ribbons in this next chart cross, that is a clear miner capitulation signal.  Miner capitulation signals market bottoms in bear markets.  Typically miner capitulation takes 30 to 70 days.  This would take us through mid July or perhaps early August.  Here is the chart below:
 

 

The good news is, there will be great bargains to be had in later June and July.  Then into the late third quarter and fourth quarter, a Bitcoin rebound could easily commence.  So, patience!

 

This next chart is yearly candles.  It is from Steve Courtney.  For 2022, this candle is red, and is the same size as the green candle for 2021.  If Bitcoin ends the year at this price level ($30K) or lower.  It could become a bearish engulfing candle.  Which is a long term trend reversal pattern.  However, it is June 8th and we have nearly 7 months to year end.  Neutral ATM believes Bitcoin will end the year well above $30K.  This fall could be a nice bull run!  Again, patience:

 

 

Monday the blog discussed velocity of money.  This chart below proves, it has not recovered since the pandemic began in 2020.  It is now dropping since stimulus has ended this year.  Here is the chart:

 

 

While velocity of money is slowing down, which means how often a dollar is spent is slowing down.  CPI is increasing rapidly, due to the stimulus and government spending.  CPI is consumer price index.  As inflation increases, CPI tracks it.  If inflation is increasing rapidly, and velocity of money is dropping.  That means demand for debt is dropping.  Here is the CPI chart below:

 

 

Thus, if demand for debt is dropping, and the Fed is about to begin QT (Quantitative Tightening), then mortgage backed securities are going to be dumped.  QT offsets QE (quantitative easing).  QE began in 2008 and has not relented since, until now!  The Fed has to keep treasuries, and sell debt.  This was discussed in detail on Monday’s blog.  This is a 2008 like set up in the US.  Mortgage backed securities underpin real estate.  If they get dumped and there are no buyers, prices have to fall.  Thus, we expect a deflationary crash both in real estate and in stocks.  Jamie Dimon of JP Morgan called it a financial hurricane coming for the US.  We believe this global macro set up will push Bitcoin down to $20K or below!  A generational opportunity for those who have dry powder, cash, ready to deploy!  

 

Now, let’s look at China.  Here is a recent headline about their economy:

 

 

Low demand, high liquidity.  How will China solve this? Now see the next headline about China’s answer for this problem:

 

 

Stimulus!  Just like the US did in 2020, 2021.  The US printed $11 trillion in 18 months.  Now it has to tighten, and thus, the deflationary crash is inevitable.  At some point, will China get to this point.  2023 or 2024?  Very plausible.  So the question is.  When this deflationary crash hits, in full force.  Where will investor money flow to?  Since the Lummis, Gillebrand Crypto Bill started in the Senate yesterday, regulation, will presumably help institutional investors increase money flow into Bitcoin.  Stable Coin regulation, is most likely the first thing to pass in the fall.  The Bitcoin Spot ETF is still far, far away.  However, once we know a Bitcoin bottom is in.  Whenever that is.  There will be a recovery.  It may be in the fall, that is our hope.  It may take longer, we just have to be patient.  The lack of a Bitcoin Spot ETF continues to plague institutional adoption of Bitcoin.  This is a fact that cannot be ignored.  It will remain as a plague until it changes, unfortunately.  We almost wish there was never a Future’s ETF created, because without the Spot ETF, it invites too much market manipulation.  Which is where Bitcoin has found itself trapped, since May 2021.  This will work itself out slowly over years.  This is why we don’t trade Bitcoin.  We are in it for the long haul.  Even during bear markets.  We are not financial advisors, and this is not financial advise.  The assymetric upside of Bitcoin may take 4, 6, 8 years to materialize.  We can wait, nothing else out there has this kind of asymmetry!  We just found this headline, and will leave you with this from CNBC.  Regarding the humanitarian side of Bitcoin:

 

 

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.