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Recession

Capitulation soonWhere do I start? Since the beginning of this bear market, I have observed every single leg down. And we reached a price level ($17k), where one could argue that this is the bottom. And for a good reason. The pattern for a lower low during summer got invalidated, lots of blood on the streets, so called ''tourists'' gone from the market, oversold metrics etc etc. What we got is accumulation between $18-25k. We could potentially say that accumulating around our low is not necessarily bad, but I'll shift this monologue towards the real economy. The real world. It's ugly guys. It's super duper ugly. Last couple of days have made it clear to me that this can't be the bottom. Too much pressure all over the board. Check FX, check bonds, check macro, check geopolitics. Something must break real soon. Presure is not sustainable and cannot be absorbed for much longer. Central banks must kill the economies and protect them at the same time. The BOE is a brilliant example. They stopped purchasing bonds, til they realised that their pension funds are about to get wrecked. They changed their policy in a day with a direct market intervention. Mind here, that inflation ranges between 10-12% in the UK. This hurts the reliability of policymakers, but at the same time, there is literally nothing else to do. Other CBs will follow in this panic mode. Japan is already there. The reason I'm writing these events is because in my eyes, there is nothing bullish to boost markets. Anytime soon. Risk is huge, and reward seems at question. As you can see in the chart I've been observing since December 2021, CMF has been my ''friend indicator'' during this downtrend. Along with some very basic technicals, nothing too complicated. What does CMF tell me now? Leg down. If this gets triggered by a credit event, I don't know. If it does, I'm afraid lots of what we've taken for granted will be questioned. It will be ugly, and I'm not even sure about how the market will look like after this. I would bid around $10-13k, and pray this is it. Lastly, one thing you shouldn't forget is that crypto has never been through a bear market in equities, a recession in global economies, and most worryingly a market collapse equivalent to or maybe worse than the financial crisis in 2008. Stay safe. I'm out. I hope I'm wrong.
Short
by koun_the_wolf
6
Almost done with Intermediate 3 down Thinking we may have ended Minor wave 4 (yellow numbers) today with a strong jump. Expecting the GDP report to confirm for everyone we are in a recession tomorrow. The yellow lines are the historical quartiles for waves ending in 535, while the light blue lines are the same for waves ending in 35. The slightly longer lines are extensions of Intermediate wave 3 from wave 1. I tend to favor the more specific data so I am considering the 535 data slightly more than the 35 data. We are looking at strong data for this fifth wave to last 2-4 days. If we do not go higher than today’s high, tomorrow would be day 1. Our original projection for Intermediate wave 3 had it ending on October 4. That would mean this wave could last for 4 days. I think Monday is most likely but we will count the waves down as we go. From a day’s perspective, waves 1 and 3 were equal in length. From an hourly perspective, wave 1 was 30 trading hours while wave 3 was only 27. This could put a maximum length of wave 5 at no more than 27 trading hours which is October 4th at 1430 eastern time (meaning until 1530). I think getting done before this is easily doable. The levels to watch for Intermediate wave 3 based on Intermediate wave 1 are between 3477.78 and 3595.96. The levels to watch for Minor wave 5 based on Minor wave 3 are between 3483.30 and 3585.24. These Minor wave levels likely help narrow our target zone for the bottom to be less than 3585 and greater than 3525. I would plan an exit around 3550 or see how we move along the way.
SP:SPXShort
by StockSignaler
5
SP500 vs M2When comparing the performance of the SP500 to the expansion of the money supply, you get a completely different picture from a traditional SP500 chart. Instead of a lost decade, try 2 1/2. We're below the levels we reached in 1995, before much of the dot com bubble. A little TA suggests we could fall 10% (3200) to 30% (2500) before this is all over. I'm definitely getting a lot of 2000-2003 vibes from the economy right now, while others are comparing it to 1929-33.
SP:SPXShort
by CapnBigPain
EUR/USD Down may we continue...The USD continues to be favourable among other currencies during these questionable times, the Euro not looking half as weak as the pound, but I am still expecting to see new lows here this week. Entry was taken at 0.96650 looking for 100 pips and fresh lows. Bare in mind though people, there was a huge down move on Friday. Trading early in the week would not be my best advice, sit still until the moment arrives. I am staying away from GBP right now as we are very much in unknown territory. It will be interesting to see whether these lows can hold, however with the way the economy is going here in the UK, nothing would surprise me. Best wishes Jake
Short
by jmw2000
2
Crude Oil Inflation SpiralWith crude oil prices declining, one might expect that the Federal Reserve's monetary tightening is working and that perhaps a pivot may be on the horizon. However, if we dig deeper, charts are sending warning signs that perhaps crude oil prices, and inflation in general, might remain elevated for much longer than expected. The chart above is a monthly chart of Brent Crude Oil adjusted in price by the Japanese Yen. In the chart, we see what appears to be a double top. However, unlike during the Great Recession, in the current situation, the price of crude oil has fallen much less quickly after peaking. Compare the two charts below. When priced in Japanese Yen, crude oil is 80% higher today than where it was after peaking in 2008 (the red ghost bars below show the 2008 price action). In other words, crude oil prices have declined much slower after their current peak than after their peak in 2008. Ominously, a bull pennant appears on the monthly chart. Although I do not have Fibonacci levels applied to this chart, the bull pennant structure is a perfect golden ratio retracement. Such a perfect bull pennant pattern could suggest that crude oil prices (adjusted in Japanese Yen) may break above resistance and continue higher, rather than decline at all. Why might this be happening? The Bank of Japan continues to maintain negative interest rates. Negative interest rates is just an obfuscated way of saying it continues to produce more and more money. Negative interest rates result in limitless money being produced through credit. Negative interest rates therefore cause money to become less and less scarce over time. Less scarcity of money always ultimately results in inflation. This continued monetary easing in turn weakens the Yen relative to currencies of countries with higher interest rates, especially the rapidly strengthening U.S. dollar. Since Japan is too highly indebted to hike interest rates at all, let alone at the pace that the U.S. Federal Reserve is hiking rates, Japan is facing a crisis whereby the value of its currency is rapidly weakening. Instead of hiking interest rates to mitigate its weakening currency, the Bank of Japan has chosen to sell U.S. Treasuries to increase its supply of dollars, and to buy Yen with those dollars. While this action may help Japan avert an energy shortage by providing the U.S. dollars needed to ensure a steady flow of crude oil, by increasing its supply of U.S. dollars, Japan also perpetuates commodity inflation. More supply of U.S. dollars keeps crude oil, which is priced in U.S. dollars, higher for longer. The more U.S. Treasuries Japan sells, the more U.S. dollars it will have to continue paying high crude oil prices, which in turn keeps inflation higher for longer, which in turn causes the U.S. Federal Reserve to hike rates more for even longer to bring commodity inflation down. Since the Bank of Japan is unable to hike rates the Yen in turn slides further. This negative feedback loop can spiral into a monetary and economic crisis if unabated. How bad could the situation get? To find the answer to this question, we can examine the yearly chart for Brent Crude Oil. Below is the yearly chart. Notice that the Stochastic RSI is indicating that Brent Crude Oil prices have strong upward momentum on the yearly chart. When oscillators push strongly higher on the yearly timeframe, this can lead to a prolonged period of sustained higher prices. The best way to hypothesize a potential peak is to use Fibonacci extensions on the yearly chart. If commodity inflation persists, then price may undergo Fibonacci extension on the yearly chart. This process will be slow and insidious with periods of commodity prices coming down as they retrace on lower timeframes, such that bull rallies trap unsuspecting market participants who believe that the era of limitless monetary easing will soon return. Monetary easing cannot return or else the commodity inflation spiral worsens. Indeed, spiraling inflation puts central banks in a Catch-22 whereby any action they can take results in economic decline. Only time will tell how this Catch-22 will end, but I will leave you with one final chart, shown below. This chart shows a regression channel that measures how far above or below its mean crude oil is currently priced when compared to its entire 160-year price history. What's alarming is that despite the rapid rise in crude oil prices, we are merely just now reach the mean (red line). If history repeats itself, price could double, triple or more from current levels in the years to come...
TVC:UKOIL
by SpyMasterTrades
7
AUD/CAD 700 Pips Bargain: AUSSIE's Plight Deteriorates FurtherFundamentals : The China Factor : Australia's economy is intimately linked to trade with China. (1) China's lack of demand for iron ore as their economy undergoes a recession. " Disaster looming in Australian economy as iron ore demand falls " (Daily Telegraph: www.dailytelegraph.com.au ) www.imf.org fred.stlouisfed.org markets.businessinsider.com (2) Deterioration of China's economy due to a zero-covid strategy (3) China's property sector is cooling (4) Aussie's Housing data becomes " haunting ": stockhead.com.au Technicals : Past support becoming future resistance Weekly BBT Monthly BBT Hit Bollinger Band 2nd Deviation in a slightly ranging market with a downward slope Medium-term trend direction is downward dHd
Short
by Rocketman
Real yields vs. Gold | Convergence of the DecadeFor the first time since April 2010, the yield on a 10-year US Treasury note hit 3.9%, as expectations of higher interest rates to control sky-high inflation continued to make people less interested in buying government debt. In September, the Federal Reserve raised interest rates for the third time in a row, to a target range of 3% to 3.25% . Money markets now expect another 75 bps hike in November. Policymakers have also cut their expectations for economic growth in 2022 by a lot. In June, they thought the GDP would grow by 1.7% , but now they think it will only grow by 0.2%. In the meantime, the 2-year Treasury yield went above 4.3 %, which is the highest it has been since 2007. This made the difference between the 10-year yield and the 2-year yield even bigger and flipped the yield curve even more. On Tuesday, the price of an ounce of gold went up toward $1,630, recovering slightly from a recent low as the relentless rise of the dollar slowed down. The yellow metal , on the other hand, stays close to its lowest levels in almost two years because people think that the US Federal Reserve will tighten money even more to stop inflation from rising. Monday, a lot of Fed officials said they were committed to fighting inflation, even if it meant some economic pain and more market volatility. Investors also looked at an OECD report in which the organization lowered its prediction for global economic growth in 2023 from 2.8% to 2.2% , citing aggressive monetary tightening in advanced economies and the length of the Russia-Ukraine war. Gold is often seen as a way to protect against inflation and economic instability. However, higher interest rates make it less appealing to hold non-yielding bullion , so investors continue to choose the dollar as a safe haven. The dollar index fell below 114 on Tuesday. It had hit a new 20-year high of 114.5 the day before, but investors took some profits and took a break after a sharp rally. The US dollar is still at a historical high against its major trading partners because people think that the Federal Reserve will tighten monetary policy even more to stop rising inflation. Monday, a lot of Fed officials said they were committed to fighting inflation, even if it meant some economic pain and more market volatility. The dollar continued to be supported by investors' rush to it as a safe haven in the face of a very uncertain global economic outlook and growing fears of a recession. When compared to the euro and the yen, the dollar was close to multi-decade highs, but when compared to the pound, it was close to an all-time low because people didn't trust Britain's budget plan.
U
by TayFx
2
What would you have on a date night? Chicken or steak? We’re going to go out on a limb here and say your date night budgets and recessionary risk are likely inversely correlated! As recessionary risk starts to weigh on investors’ minds, purse strings for date nights are likely to be tightened, which spells trouble for the date night classic, wine & steak pair. Cattle Futures have joined the broad market selloff over the past few days as investors remain on edge. This recent move lower has confirmed a break below the neckline support for a double top pattern observed on a shorter timeframe, which is noted as a bearish reversal pattern. On a longer timeframe, the decline has also broken the 4-month long uptrend for Live Cattle. With not much in the way of support, it’s quite possible to see another leg lower, similar to the pattern we observed in May 2022 where prices corrected around 4.5% once the uptrend was broken. Using this as a reference, the 143 range marks the next potential stop for live cattle prices if we were to extrapolate a 4.5% decline from the breakout point. The broken uptrend followed by the confirmation of the double top pattern spells trouble for live cattle prices. As such, we lean bearish on live cattle futures and will likely swap the date night steak for perhaps chicken… Entry at 148.550, stop at 150.325. Target at 144.850 and 143.075. The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com Disclaimer: The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios.
CME:LEZ2022Short
by inspirante
8
Risk Off: Dollar Up, All Else Falling CBOT: Micro 10-Year Yield ( CBOT_MINI:10Y1! ) Last Friday, U.S. stocks plunged again as soaring interest rates and FX market turmoil fueled investor fears of a global recession. The Dow fell below 30,000 and closed at 29,590, down 486 or -1.6%. S&P 500 broke through 3700 and settled at 3,697, down 1.72%. Nasdaq Composite lost nearly 200 points and closed at 10,868, down 1.80%. Russell 2000 finished at 1,679, down 2.48%. On Wednesday, the Fed raised Fed Funds Rate by 75 basis points to 3.00-3.25% range. Market expected two more rate hikes totaling 125 bps in the November and December FOMC meetings, bringing it to 4.25-4.50% by year end. U.S. Treasury yields surged this week after the Fed's move, with 2-year rate topping 4.2%, a 15-year high. 10-year Treasury yield is currently quoted at 3.687%. Meanwhile, US dollar index ( ICEUS:DXY ) exceeded 113 points, its highest level since April 2002. Euro currency fell to 0.9688 against the dollar, a 20-year low. British pound closed at $1.08, a new low in more than three decades. Global Market in a Risk-Off Mode On August 29th, I pointed out that global financial markets are in a paradigm shift triggered by runaway inflation and high interest rate. All major assets would undergo “repricing”. The recent US CPI data and Fed rate hike help speed up this process. The title chart at the top of this analysis shows year-to-date returns from major financial assets: • US Dollar Index ( ICEUS:DXY ): +17.73%, at 20-year high • S&P 500 ( SP:SPX ): -22.72%, in a bear market territory • WTI Crude Oil ( NYMEX:CL1! ): +3.05%. In March, crude oil gained 60% in response to geopolitical crisis. It turned south ever since the Fed began raising interest rate • Gold ( COMEX:GC1! ): -8.95%. Under a strong dollar, gold has become a risky asset being disposed off by investors. • Euro ( CME:6E1! ): -14.07%. With geopolitical risk compounding a recession, the economic outlook of the Euro-Zone countries is very gloomy • High Grade Copper ( COMEX:HG1! ): -23.77%. Copper demand will decline in the event of global recession. Futures market has fully priced this in • Soybean ( CBOT:ZS1! ): +6.54%. Corn futures was up 25% in June. But the gain was largely given away as the fear of recession outweighed the risk of food crisis In a “flight to safety”, investors shift their assets out of stocks, bonds and commodities, into US dollars instead. With strong exchange rate and high interest rate, US dollar appears to be the only “safe haven” in market turmoil. How to Invest in Dollar? If you are holding financial assets in foreign currency, converting them into US dollar is a logical first step. A risk-averted investor may put dollars into a flowing rate bank account, or purchase money market fund. In a defensive move, you park money in US dollar account until market stabilizes and new investment opportunities emerge. Don’t tie up your money in long-duration deposit, as interest rate is almost certainly going to rise. An active investor may consider trading risk-free US treasury bonds. Other dollar bonds such as corporate bond, convertible bond and municipal bond are subject to repricing. Bond price and bond yield are inversely related. As we expect yield to go up, a trade could be constructed by shorting a cash treasury bond, or shorting CBOT treasury bond futures. CBOT Micro Yield Futures list for two consecutive months. They are more intuitive to trade. If you hold the view that treasury yield would rise, long the micro yield futures. November contract will begin trading next week. Why do I prefer 10-Year ( CBOT_MINI:10Y1! ) over 2-Year ( CBOT_MINI:2YY1! )? We are currently in an Inverted Yield Curve environment. October 2-Year Yield (2YYV2) is quoted at 4.196%, but the 10-year contract (10YV2) is quoted at 3.739%, 457 points lower. In my opinion, rate hikes are fully priced in on the 2YY quote, but 10Y may still have some upside potential. The next FOMC meeting is November 1-2, and the rate decision would be announced at 2PM eastern time on November 2nd. The 10Y November contract may trade till the end of November. Financial market is extremely volatile this year. Getting an information edge increases your odds of success in managing risk. I suggest leveraging real-time market data for a better gauge of market situation. TradingView users already have access to delayed data. A Pro user could upgrade to real-time CME market data for only $4 a month, a huge discount at the time of high inflation. Happy Trading. Disclaimers *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
TVC:DXYLong
by JimHuangChicago
33
| XRPUSD | OVEREXTENDED MOVE HAS REACHED ITS RESISTANCE!Good day all, This article is an extension of my previous article, which basically explains the direct correlation to the previous bear market structure. The first article is recommended to be read prior to this and therefore I am linking it below: Now that you have scoped that article all of this will make sense. I have zoomed the time frame to the daily chart and have found even better results of correlation between the two time zones. As seen in yellow these levels of support and resistance are indicated as being the previous bear market's strong levels of support and resistance. Now the correlation between the 2 aren't exact but are almost exactly $0.025 apart from each other which is an astoundingly interesting finding as past price action does tend to rhyme. If you read the last article you will see why I have placed month intervals from 17-19, if not they indicate the months following the beginning of the bear market in each respective time zone, which happen to be the same amount of months leading up to the most recent explosion in price. This fact alone would be a coincidence however after analyzing the daily chart correlation I have found key levels which are too similar to be a coincidence and therefore can be used as a good indicator of where the price could go. Some would argue that XRP has finally detached itself from the BTC cyclical structure due to the most recent hike in price leaving BTC in the wake, however, what you must understand is there are always going to be idiosyncratic events that detach individual assets from a general cyclical market mover, which in this case in BTCs market structure. The idiosyncratic event as we all could guess is the current SEC VS Ripple summary judgment brief news. Another bearish indicator based on this current news is that generally investors and retailer traders tend to buy the news and sell the release and this may be one of those cases, even though a win for Ripple would be revolutionary news it will most probably result in a healthy retracement back down to the cyclical average as the idiosyncratic phase as passed. I will also add fuel to the fire by adding that we still have plenty of bear market left based on the halving cycle being far from sight and a potential continuation of the bears for BTC, which in terms is a catalyst for the continuation of the entire market to the downside. Reference to 2019 May-June (17th month): In this time period the price experienced a move of above 60% growth within this month placing XRP above the previous resistance that it had consolidated below for around 171 days which made this resistance exceptionally strong, however, the price eventually converted this resistance into support for a period of 57 days before all hell broke lose and the price saw a steady decline leading to the 2020 bottom on the 13th March at the valuation of just under $0.11. I am not in turn coming out by saying the price is going to reach these levels again but that is what the historical data shows. The Image below expressed the price action of the 17th month which correlates well with the current 17th-month price action: Reference to 2019 June-July (18th month): We have not entered the 18th month yet however, based on prior correlation at such an accurate degree we could see such price action occur. We saw a retracement at the beginning of the month in order to create the structure for the double top that followed near the end of the month. The price touched the key support level multiple times solidifying the $0.38 level as a strong support and resistance level for future prices. I have attached both the 17th and 18th-month price action to better understand the double top: Reference to 2019 July onwards: The price did not hesitate to continue at a fast pace to the downside leading to the eventual bottom at $0.11 in march of 2020, 256 days later. If I had to use the exact amount of time between the 19th month and the bottom to call a bottom of the current market it would put us at the 25th May 2023. This is not by any means a legit statement however if the price action does follow the general action of the past we could see a bottom around that time, which analysts have predicted prior to my findings. So who knows, all we can do is speculate and use the past as an indicator at the end of the day. I have attached an image of the whole 2019 bearish period up to the current price: I am thoroughly thanking you if you got this far in the article and if you did please comment your opinion and leave a like, would be much appreciated.
BITFINEX:XRPUSDShort
by Crisp_Flow
$TLT: Preparing to buy when safeI am monitoring bonds here, as we are approaching the target of a weekly down trend signal that fired recently, while the monthly timeframe trend is about to reach its end. By the end of September, the odds of a reversal in bonds will be very high, while equities are looking like they could crash lower from here possibly, and we could get inflation to come down, likely due to the effect of recessionary forces at play thanks to Powell's hawkishness. Since the Federal Reserve is hell bent on killing inflation hiking rates, and the data they use won't make them worry about this course of action until it's likely too late, odds of something breaking badly here are substantial. As such, I'm eager to spot the bottom in $TLT / $ZROZ to invest. We have a decent enough juncture here, where it starts making sense to pay attention to reversal cues in multiple timeframes and monitor signals closely to go long big time when confirmed. Best of luck, Ivan Labrie.
NASDAQ:TLTLong
by IvanLabrie
Why the SP500 signals recession...Looking at the SP500 on the weekly view, it is clear to see that there is a downtrend, although I believe this is just the beginning of the drawdown. We can see that after it reached the high of 4800 in Jan22, it dropped to around 4200 before forming a small series of green candles of recovery. *This is a pattern we have seen multiple times in the past before a market collapse. Please scroll down further* After this initial 'drop 1' , we enter what I am calling 'drop 2', we have already seen a continued series of red candles which I believe to keep dropping massively - this isn't a hot take by any means, especially with many talking about the UK housing market bubble ready to pop, Putin talking of nuclear weapons, China potentially tipping into a recession from their housing market and finally with us just coming out of Covid.
SP:SPXShort
by HBSPG
Is The Crowd Ever Right? This article aims to address a question that seems to be burning at the back of many investors’ minds: Can the crowd be right? How can we enter a recession or depression when everyone seems to be thinking about it? But first, I’ll give a bit of background and some of my opinions on the current fundamentals of the cryptocurrency market, and why these opinions are in keeping with my general character. The Crowd's Market Choices and Economic Revolution As anyone who has been following me for the last few years will know, I’ve tended to embody a somewhat revolutionary mindset. I’m a hippie artist guy who finds dystopian realities disturbing, but also fascinating. At the same time, I’m also hopeful we will continue to evolve as a species and “figure our shit out.” That’s why I frequently talk about big tech collapsing and why I’ve even speculated about crypto as a promising new financial system. Particularly over the last two years, several observations have led me to become skeptical of something I once thought had some potential. In fact, it seems more and more that cryptocurrencies have become just another way for profiteers to generate income off people’s mere hope to obtain financial freedom. This seems pretty messed up, right? Cue Michael Saylor’s pseudo-radical, esoteric Tweets. Being a supporter of some cryptocurrencies has always given me a vague feeling of cognitive dissonance, and events of the last two years have revealed to me why that’s the case. Current implementation of cryptocurrencies just doesn’t align with my values. After all, I was a hippie artist guy long before I ever got into crypto or financial markets. I’m still entranced by the idea of a frictionless global currency that’s accessible, lightweight, and inclusive. This is why I feel more neutral to positive towards projects like Nano, Stellar, and now Algorand. One of the things I find interesting about crypto is that people are free to choose projects and protocols that fit their own economic vision. It’s a fascinating sociological case study into Internet communities and economic values. But I think this hyper-decentralization itself has become a downfall of the space. The projects that work the best as currencies have been left by the wayside, while the clunky, expensive, expansion-oriented projects garner most of the attention. In some ways, the growth of Ethereum, Bitcoin, and Binance Coin all represent the parallel growth in our society––a growth without real substance and meaningful positive change. And with clunky, bureaucratic infrastructure to boot, with lots of unnecessary fees and almost too many instances where one can slip up. In fact, American Neoliberal economics values the “pull yourself up by your bootstraps” mentality, which is why healthcare is not universal here, and why the social welfare system seems to entrap rather than empower. If you want evidence, read American Society: How it Really Works by Joel Rogers and Erik Olin Wright. “Being your own bank” is just the financialized version of “pick yourself up by your bootstraps”, so it’s in effect anti-revolutionary; it merely goes along with the Neoliberal policies of Nixon, Reagan and Clinton (I think these three are the biggest culprits). Crypto is very American, and is aligned with the policies of the American government since the early 1970’s. Therefore, developing countries adopting crypto seems to be more of a step closer to disaster than away from it. Much like socioeconomic policy in the U.S. It enforces individual responsibility in such a way that people don't have much to support themselves. It pretends to be revolutionary, when it is really oppressive and disempowering. I speak mostly of the United States, since this is where I live, and it’s the socioeconomic context I learned about in social work school. What I’m talking about here is also lasting output. You cannot say, with evidence, that Bitcoin or Ethereum has a net positive effect on access to resources, education, sound infrastructure, or financial efficiency. Sure, there are some places in the world where using Bitcoin for purchases makes more sense. These are places where everyday citizens experience absurd inflation and do not have easy access to banks or dollars. In this case, it serves a distinct purpose as a tool––essentially a last resort. It is a good thing to have last resorts, but I also wonder whether localities within these countries would simply just develop their own currency or bartering system. I wouldn’t be surprised if this were the case. In some ways, Bitcoin is even more obedient to the whims of the elite, since supply is easily accumulated by large wealthy entities over periods of time. If a small community in an inflation-stricken nation decides to use small pebbles as currency, they have more control over the rules than had they chosen to use Bitcoin. With Bitcoin, they’d be subject to numerous technological limits, portals, fees….and that’s just unnecessarily complex. This article wasn’t really meant to be about crypto and why I don’t particularly believe in its long-term durability. But my belief in its durability affects how I, as an “analyst” read the market. There seems to be a pervading assumption in markets that when everyone is talking about selling and fear is palpable, smart investors should really be buying. However, natural logical reasoning dictates that if a bunch of people simultaneously give up on something, the project will halt, and it won’t get finished. So why has the market tended to behave differently? Why can’t we just be allowed to give up on something that doesn’t work? We saw with 2008 that a bunch of banks in the U.S. could have completely failed, because they did not adequately serve the people with integrity. But…the government stepped in and bailed them out, instead of improving the system. This is unfortunately in line with the monetary policy that has snowballed into the current crisis. I believe the reason why the crowd always seems to be wrong is mostly a function of wealth inequality and exploitation within markets. This is because when the general public is excited about something, they are often late to the game, and they are already being actively exploited, whether they know it or not (early investors using the purchases of newcomers to generate profit). Then, once the bubble pops and prices bottom out, the everyday person has already sold because they cannot afford to see their assets decline any further. Then, the market runs out of sellers while the wealthy (and even the moderately privileged) can afford to continue adding to their balance sheets. What breaks this cycle? A debt reckoning and deflation. If one subscribes to the belief that markets naturally correct themselves to rebalance, and if one observes the pace at which inflation has exploded relative to stagnant wages since the '70's....then clearly there is an imbalance, although it is difficult right now to ascertain what effect this imbalance will have. What is always clear is that he process of a return to equilibrium after unsustainable growth is a painful one. Excess gets trimmed, and as the saying goes, you get to see who’s standing naked once the tide goes out. The ones in power feel the pain last because they’re standing deep in the water. There is also the pervading idea that markets only go up. Let’s take a look at the Japanese markets, which have not even breached their highs from the late 1980’s. This shows us it is possible for U.S. equities to enter a period of slower growth that lasts decades. Yes, decades. In this case, even though the crowd seems to be overwhelmingly bearish, they are secretly bullish––meaning they do not believe a recession would last longer than a couple years, at the very worst. In a way, the crowd actually still expects investing in equities and other assets to be a surefire play. And again, if we look at Japan––they have been experiencing an aging crisis. Many studies have recently shown that the same is about to hit the U.S., as the baby-boomer generation reaches old age while younger generations have less and less children. This is not an environment suitable for the kind of growth the market has seen since the 1970’s. The Crowd's Stance on Bitcoin Active addresses have not sustained meaningful growth since the 2015-2017 bull market. studio.glassnode.com In fact, the amount of active addresses has essentially stagnated. This leads me to believe that everyone who wanted to own Bitcoin has purchased some already, and it will be hard to get others to do so without enforcing it. But even with El Salvador and The Central African Republic adopting it as legal tender, addresses have grown minimally. The crowd seems to feel indifferently or negatively towards Bitcoin. To be fair, it’s gotten a lot of flak for its environmental impact. And this is warranted: If Bitcoin scaled to facilitate a quantity of transactions on par with the current financial system, it would be far more devastating. Does this mean Bitcoin’s growth is finished? Amongst the remaining Bitcoin bulls, I've noticed three major justifications for continued price appreciation: 1) Cycles. Bitcoin will definitely go up again because of its repetitive cycle behavior. *Wink Wink* Trust me bro, now is a great price. Anything under $20k is a good buy. 2) Negative funding – funding has been consistently negative for weeks and weeks while open interest remains stubbornly high. This means the crowd is shorting, and they will be squeezed. 3) The dollar will eventually become nearly worthless, since the FED will need to turn the money printer back on. Everything else is priced in. The history of currencies tells us fiat fails. 4) The crowd is bearish, so we should all be buying. Now, I’m going to address each of these points and explain why I think we should be careful with this logic. 1) This is making an assumption based on past behavior. Bitcoin has already deviated from this behavior by lingering near its previous cycle high without a meaningful bounce. Although the crowd is short-term bearish, it is still long term bullish. People are hopeful to purchase Bitcoin at $12k or lower, expecting another cycle eventually. 2) This is an interesting one. Exchanges generally want trading activity. They also want asset prices to move up, since it attracts new investors to their platforms. Funding has been extremely negative across the crypto market for much of this year, even as prices have continued lower. I recall ridiculously negative funding for LUNA right before the collapse, and recently extreme negative funding for ETH right before the merge. Usually, negative funding tells us that the market is biased to the short side. But is that really what it tells us? Or does it mean the exchange itself wants to make shorting more expensive, to make retail traders more likely to keep tight stops and close out positions early? These “forced” trades generate fees and income during a bearish period for the exchange. 3) The USD hasn’t been around for terribly long. Because it holds so much power internationally, it is unlikely to become worthless in the short term. In fact, its value goes up as the demand for debt decreases and the demand for cash increases, regardless of its supply. My opinion is that if the money printing and QE in the U.S. had gone into substantial projects (infrastructure, education, clean energy, etc.) we would have seen true growth, which could be sustained. It might have taken more time, but it would not result in bubbly market behavior requiring constant bailouts. Our systems would be more self-sustaining. Money spending isn’t a bad thing. It’s what we do with it that matters. 4) We have programmed fear responses for a reason. Animals will often sense an earthquake or hurricane well in advance, and escape to higher ground or a protected area. Just because everyone seems to be panicking or running away does not make disaster any less likely. As I’ve written above, it only seems to be that way because there are certain members of society who take advantage of the herd to generate liquidity and profit. Since this article has been fairly long, I’ll give a small TL; DR: The crowd is usually wrong because they’re being fleeced by someone with more power. A mass sell-off IS a revolution – action towards change. The crowd can be right, in a sense. The markets need to tumble significantly for new powers to establish and allocate resources mindfully. And I’ll leave with a couple of questions: Bitcoiners believe this bear market won’t last more than a couple of years, and certainly most believe Bitcoin will see another cycle. But then, most outside of crypto seem to not believe in it and find it unattractive, scammy, or even funny. By abstaining from crypto, people are exercising their freedom to choose. Will they be right, or is Bitcoin “inevitable?” As I've mentioned in some of my recent posts, Bitcoin needs to manifest an impressive 100+% rally in a pretty short timeframe in order to keep up with its long term trend, particularly against traditional assets. That required percentage keeps increasing every day. Ideally, Bitcoin needs to clear that $48k level marked on my chart and stay above. What could be a catalyst? This is not meant to be financial advice, but speculative and reflective opinions on current conditions. Please consult a professional financial advisor before making significant financial decisions. -Victor Cobra
BNC:BLXShort
by VictorCobra
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