Bitcoin; the battle is your time horizon!
It is very hard to predict where Bitcoin will be over the next few months. The farther out the time frame is, the easier it is to see where Bitcoin is going. The chart below is very simple. It doubles the value of Bitcoin every year. Stair steps to $102,400 by end of year 2023. The point here is, look further out. Look past the bear market, into 2023, 2024, and 2025. That is where the greener pastures are. 2022 has been an ugly year, and it is almost half over. Just six more months to go!:
The number of Bitcoin accumulation addresses holding Bitcoin over 6 months is at all time highs. Never before, has there been this level of Bitcoin adoption. This bodes very well for future years, after 2022:
It could bode well for the fall of this year but we really don’t know yet. The accumulation of Bitcoin since last May, has been peaks in the mid to upper sixties and troughs in the low thirties to upper twenties. The last 12.5 months has just been sideways accumulation. There will be a run up, likely due to a supply shock. But when? Could a miner capitulation drop the price down into the low twenties and then a supply shock direct it over $100K? Yes, but how long would that take? This next chart shows a dump to $14K this summer, then a parabolic run to $200K by early 2023. We never would have thought inflation would get this bad, back in February 2020. Right? How bad will inflation be in February 2023? There is no ceiling to it. Therefore, Bitcoin price action has no ceiling either!:
Wednesday’s blog mentioned a deflationary crash. However, the Fed in their news conferences use the word disinflation. Disinflation, and deflation are the same thing. Higher rates, quantitative tightening, selling off mortgage backed securities to commercial banks. Which hurts the banking sector. Which in turn, destroys the economy, over time. That is deflation. But if the Fed calls it disinflation, it sounds nicer. Get it? Disinflation is just window dressing for the word deflation. June 15th is the date when quantitative tightening begins according to the Fed. After that, mortgage backed securities begin to mature and roll off the Fed balance sheet. Per the Fed, once that runoff is well underway, they could potentially sell mortgage backed securities. Between that and raising rates, the US economy will see deflation or disinflation. Choose the best word to describe it. It will impact Bitcoin in the short term. However, it is plausible that Bitcoin could see a run up later on, when the wall of money runs away from equities, toward hard money. That is Gold and Bitcoin, some Silver as well. This mass exodus has already started into Bitcoin. The institutional investors, hedge funds, pensions and others investing into Bitcoin is well documented. Once these processes are complete, and we don’t know how long that will take. We expect Bitcoin to be priced exponentially higher than it is today! This chart below gives us an idea on what to expect. If the Fed is keeping treasuries which they have made very clear. They are letting MBS (mortgage backed securities) runoff, via maturity. Then, by end of 2024 that process will complete. In the exact same time frame that is going on, Bitcoin will have it’s halving in early 2024. The Fed will regulate everything with rates, they will slow down the crash. Which means they will eventually lower rates. Once that starts, the macro economic environment will be ripe for Bitcoin. Here is the schedule the Fed will be using for the MBS runoff:
We also have to consider the level of manipulation Bitcoin is experiencing since May 2021. This Wykoff Distribution pattern chart describes it well, and gives a well known pattern for market manipulation. This really looks like what Bitcoin has been doing the last 12.5 months:
We still see things getting worse before improving. Keep in mind, 195K Bitcoin were sold in May by miners. These coins were put on exchanges to sell, presumably. We expect a leg down, to $20K or below. The flush out completes, rate hikes come to an end. Then it’s happy days again. So keep a long time horizon. Buy this dip that is upcoming, and look to the future. Ignore the noise, and stack Bitcoin! Once sovereign wealth funds join pensions, nation states, hedge funds, and institutional investors buying up enormous positions in Bitcoin. It will become a race. Fear of missing out will again, take over. We don’t know when this happens. Just that taking advantage of that scenario, happens now. While the prices are cheap! We are not financial advisors, and this is not financial advise. Keep Bitcoin time horizons long. Don’t get trapped in short time horizon thinking. You will be fine!
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