Bitcoin – Why it keeps Going UP!

Yes, Bitcoin crashed from November through January.  Now it’s February and the price reversal has confirmed.  This next chart from Will Clemente shows futures perpetual funding rates are trending from negative to positive.   The price is trending up at the same time as it has done before.  As more volume on the buy side comes in, Bitcoin will surge.  Let’s watch this chart in February and March.  Should be interesting.  Here is the chart:

 

 

Also, this next chart shows Bitcoin breaking through the three month descending wedge and then in the chart on the bottom the Nasdaq crashing, as Bitcoin surges.  Bitcoin has broken the coorelation to the Nasdaq, it has held for months now.  Here is the chart below:

 

 

Notice the green arrow down on the lower chart.  The Nasdaq dumping, Bitcoin pumping and this trend is a week old.  Likely this will continue.  For how long, nobody knows for sure.  

 

The network effect, the number go up technology built in to Bitcoin has been very well discussed in our blogs.  We see it starting to appear in the first chart above.  If green candles appear in that future perpetual funding rate chart next week as well and they are taller into March.  We know we have a winner.  That would tell us, if it does happen, that Bitcoin has broken the Nasdaq coorelation.  This would give us more confidence this reversal will last a good while.  So far, it has not been a full week yet.  We just have to watch it.  Other reasons for Bitcoin to keep going up over a decade plus time frame, is global macro outlook globally.  All fiat currencies will have to print to fund the governments in G20 countries and this inflation will devalue smaller government currencies.  We expect many of these smaller governments will follow El Salvador’s lead and use Bitcoin as their legal tender.  The next decade will be very interesting indeed!  Here are some charts to show this.  US current receipts/GDP is the blue line, while current expenditures/GDP is the red line.  So the US Government is spending 140% over what it is taking in in tax receipts.  OK cool!  Here is THAT chart, from Lyn Alden: 

 

 

Next we have total US debt as % GDP on the blue line, and T bill yield adjusted for CPI inflation.  So the US has 130% debt to GDP ratio, with -6.9% T bill yields, CPI inflation adjusted.  That is scary!  Yet, for any Government in that much debt, keeping yields that low (interest rates) allows cheap borrowing and with that much debt, it deflates the value of the currency.  The Government pays back the debt with devalued currency.  Combining cheap yields and high debt to GDP is terrible for the citizens, great for the Government.  It also creates wealth disparity by inflating assets like Real Estate and Stock.  Here is that chart, from Lyn Alden:

 

 

This next chart, also from Lyn Alden is similar in that it shows total public debt (blue line), compared to effective interest rate.  Low rates and extremely high debt levels.  The USD is the global reserve currency so, it can simply print money to cover the debt load and keep rates so low that it devalues the money it is paying the debt back with.  This is also why Neutral ATM has maintained that the Fed will NOT raise rates in March.  IF they do that they will increase the debt service to the US by $300 Billion for every 1% they increase rates.  Also known as 100 basis points (bps).  Here is that chart:

 

 

For reference, here is the US debt clock.  Total public debt is now over $30 trillion:

 

 

This next chart shows federal debt as % of GDP in blue, and non federal debt as % of GDP in orange.  In the 1940’s the US had to inflate the debt away since it got so high during WWII.  This time the federal debt got even higher, and no war going on.  The monetary system is at the end of the cycle.  The US still has to inflate their debt away.  They cannot afford to raise rates, if they do it will be very, short lived.  Raising rates for any period of time will only destroy the monetary system faster than inflation.  Here is the chart below, from Lyn Alden:

 

 

If inflation is going to persist.  Bitcoin will also persist, in the network effect, metcalfe’s law, and in it’s deflationary power.  It truly is the best and only true hedge against an oncoming era of inflation.  When projecting total deficits, primary deficits, and net interest as % of GDP, inflation adjusted yields will get more negative to 2050, when they are projected to be -13%.  That assumes no recessions.  So by 2050, inflation adjusted yields could be -50%, or worse, if there are a few recessions added.  Which is to be expected.  Here is that chart, from Lyn Alden:

 

 

“In other words, regardless of who is elected going forward, I view the range of policies that could potentially allow US government bondholders to be paid back with positive purchasing power to be vanishingly small. Neither Democrat nor Republican administrations will be able to solve the debt problem without holders of cash and bonds losing considerable purchasing power.”  Lyn Alden

 

Lyn is the best global macro analyst in the industry.  Global macro is really driving the bus when it comes to outcomes for investing.  We do not see that changing for the forseeable future.  Yes, we expect regulations.  However, Bitcoin is not worth selling unless the asset the money is being used for is also a hedge against inflation and is appreciating enough to stay positive, inflation adjusted.  Land, Real Estate, Art, Collector cars, guns.  Anything that appreciates enough and has some utility.  Since Bitcoin is the ONLY truly decentralized digital currency, it is separate from all other crypto currencies.  

Also keep in mind, the lightening network capacity growth is trending up like Bitcoin adoption is.  

 

 

Governments can make onramps hard to find into Bitcoin.  They cannot kill it, or make it fall to $0.  Our choice is, double our income every 6 or 7 years now.  Double our income every 2 or 3 years by 2030, and perhaps every 6 months by 2035.  It could be faster than that!  The other option, is maintain our store of value in Bitcoin, all the way out into the future.  Then income does not have to change that much to increase total wealth.  The choice is clear.  The earlier you choose Bitcoin the better the returns.  Bitcoin won’t stay under $50K or even $100K that much longer.  These prices will be a bargain in 4 years.  

 

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.