Dangerous MACD 3 Day Cross, Bitcoin’s Reaction?

Bitcoin can age you.  It’s just a fact.  So please, zoom out and look long term!  Here were common reactions to Bitcoin investing over the past 12 years:

 

Documenting Bitcoin (@DocumentingBTC) Tweeted:

• 2010: "A bitcorn?"
• 2011: "No one uses it"
• 2012: "Only nerds use it"
• 2013: "Only criminals use it"
• 2014: "Only libertarians use it"
• 2017: "Only speculators use it"
• 2019: "Only a small % of people use it"
• 2020: "Only small companies use it"
• 2021: "Only small countries use it"

So far, El Salvador, Ukraine, and Madaira, Portugal have made it legalized tender.  Many other countries are voting on that, it gets political.  We will announce them as they happen.  What is not volatile and all over the map, is Bitcoin blocks being produced and the block reward being cut in half.  See this chart to visualize it.  The Block rewards are programmed in.  They cannot be changed: 

 

 

So, in 2024 around April or May that is the next Bitcoin halving.  Whenever they reach block number 210,000.  The miner reward is cut in half and another round of supply shock hits the market.  It used to take 18 to 24 months to reach the peak of the bull market.  24 months will be May 11th.  That is in under a month.  Hard to say whether Bitcoin is going to dump or not with this MACD cross luming in May 2022.  We will discuss that later.  For now, look at the realized market capitalization chart.  It stairsteps up with each halving and you can see the stairs are getting less steep.  It is noticeable that the peak of each market top, is where the realized cap goes from a major uptrend to sideways.  See the chart below:

 

 

For months last year we compared this bull run to 2013.  Double top in both cases.  However, in 2013, the second leg up was massive.  So far, this bull run has seen a $64K top and a $69K top.   Will we see a third top? Half the analysts say yes, half say no.  Confused?
 

So are we.  Let’s look at global macro a little bit, for clarity.  Sri Lanka’s central bank is now officially bankrupt.  See this quote below about it:
 

“Sri Lanka has had an unblemished record of external debt service since independence in 1948. Recent events, however, including the effects of the COVID-19 pandemic and the fallout from the hostilities in Ukraine, have so eroded Sri Lanka's fiscal position that continued normal servicing of external public debt obligations has become impossible.”  

 

Sri Lanka cannot pay there debt obligations.  Now, let’s look at inflation in the US.  First, flexible price CPI less food and energy:

 

 

It’s at 19.5% right now and an all time high.  What about PPI, producer price index, which is at 11.5%, also an all time high.  Producer prices are raw materials like Crude Oil and Wheat.  When PPI is high it will drive up CPI with it.  Expect CPI in the double digits sometime soon this summer.  However, the next chart is shadow stats, 1980 statistics before the CPI was manipulated with the ratio back to 1982 to 1984.  We have talked about that a lot in past blogs.  Shadow stats inflation % is true cost of living including rent and food, gas.  It is real.  See the chart below: 
 

 

17.5%, which will be higher in the northeast and west coast regions of the US.  Throughout the summer, we expect high inflation.  We also expect China Taiwan crisis to break out much like Russia Ukraine.  We simply bring up these crisis, because they are black swan events which could impact stocks, real estate, and Bitcoin.  

On another note.  A riot fence has now begun to be erected, around the Federal Reserve building in Washington DC.  Why?  What do they know that we don’t?  Click here to view picture.
 

We all know inflation is heading north not south.  Regardless of rate hikes.  The Fed has little to nothing they can do to stop inflation.  Do you really believe the Fed will institute 11% to 13% 10 year bond yields like Paul Volker did in the early 80’s?  They can’t.  The US has $30 Trillion in national debt now.  Which did not exist, 1976 to 1984.  

 

This next chart shows us what an inflation hedge can do:

 

 

In 2017 had you invested $1K in Bitcoin the buying power would now be worth $20,300 in 2017 dollars.  Had you left that in dollars since 2017, it would now be worth $505 in 2017 dollars.  Therefore, what is the flight to safety asset in the world today?  Gold?  It is up 198% since 2017.  Thus, in 2017 dollars Gold is worth $995 today.  So you can see, the flight to safety will always be to Bitcoin.  The first chart shows how programmably scarce it is!  Will this make it a better, or worse hedge against inflation?

 

Now let’s look at a halving regression chart.  Bitcoin’s current bull run is in purple.  We have mentioned lengthening cycles in past blogs.  Does that mean there will be a third top though?:
 

Not necessarily, the current pattern on the charts since December is an ascending channel.  That is a BEAR flag!  Descending channels are bull flags.
  
This next chart from Steve Courtney shows the MACD cross, which is bearish, and a sign of a reversal to the downside.  See this chart below, whenever the blue line crosses below the red line the price action goes bearish historically since 2010:

 

 

Additionally, the median line of the gausian channel in the chart below was a rejection last week, bearish:

 

 

The golden zone inside that box in the chart is the best opportunity to buy cheap Bitcoin.  Also notice the gausian channel in the chart above has now turned red, also bearish.  Finally, this last chart shows the stochastic RSI and that is coming up on a bearish cross as well.  

 

 

So we are torn between the technicals on the charts showing bearish and the inflation increasing which is bullish.  Also, scarcity of Bitcoin is generally bullish.  We have seen indicators showing Bitcoin leaving exchanges into cold storage at historic levels recently.  Will this overcome the chart indicators?  We don’t know and we are torn.  Suggest waiting for lower prices than just $39K for buying opportunities.  We have seen 2022 price targets from $15K up to $180K.  The median of that is around $82.5K.  Of all of these above chart indicators, the MACD cross in mid May is the scariest.  If you sell now to buy at the low predictions, sub $20K, and in the fall, Bitcoin moons.  Then what?  Best to wait, and look for better buying opportunities.  At least keep most of your Bitcoin invested, in case it does moon.  We are not financial advisors and this is not financial advise.  We may be in no man’s land right now, but inflation is not going anywhere.  Once Bitcoin regains some strength again, and inflation continues upward, the DXY index comes back down, then Bitcoin will run.  Bitcoin has always been the inverse to the DXY chart.  It is just under 98 now.  It was in the 80’s a few months ago.  Once the DXY comes back down, then Bitcoin will likely be the flight to safety that it is.  Until then, it’s an anxious waiting game.  So zoom out, look at decade long charts, and relax.  

 

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.