Analysis of a Sick Market - Part 2 (Everything Else)

bitbrain (63)in #bitcoin • 5 years ago (edited)

A brief look at everything else:

A week ago I said that this probably wasn’t the start of the long-awaited big fiat money crash, and my reasons for believing that are sound. However; the knock-on and panic effects of Covid-19 are such that they may succeed in prematurely destabilising the fiat markets past a critical tipping point. If that does happen, then all bets are off as to how far fiat-based markets could fall. At this stage I still don’t think that this is the start of the next “Great Depresssion/Recession”, but I'm not ruling that possibility out completely.

It is with great interest that I’ve already observed the strategy of the international oil price oligopoly (OPEC) fall apart (this past Friday). If someone had told you two months ago that we would see oil trading at less than $30 per barrel, then you would have called them insane, yet here we are. There are serious cracks in the fragile systems upon which the entire global economy rests - we know that. Now some of the foundation stones (or “cards” rather) are crumbling...

Gold is doing well. All credit to the gold bugs (except for Peter Schiff - who remains a bitter old fool): with everything else falling - even other precious metals - Gold seems to be the last trusted store-of-value. Full disclosure: I haven’t looked into property prices (that’s really not my field of expertise), though I expect that such illiquid assets would react a lot slower to a market crash.

A bold trader may consider selling Gold at the right point of this carnage, perhaps for Silver? I’m not a bold trader, I’d rather hold my (little bit of) Gold since I place high value on its ability to store value for me.

The Gold/Silver ratio is back up at ATH levels of 1:100. With Silver still a not-quite-trusted-yet rising star, I am tempted to pick some more up if I see it going cheap. If you are in the market for some Silver, bear in mind the Silver-buying limitations I describe in detail in my “Silver for Survivalists” series.

As far as fiat currencies go, the world is turning to the mighty USD as a port of refuge during this storm. Since I’m not an American, my fiat currency holdings could be considered “Forex” for the purpose of this discussion. For the record - my fiat holdings are being absolutely culled in USD terms. My home country is not unique in this regard, I see other foreign currencies performing similarly. That trend is unlikely to change as long as Covid FUD continues.

It goes without saying that the major stock markets are in trouble. The major market indicators and stocks are well covered by the mass media. Perhaps less obvious are the derivatives, which are surely following suit. Long squeezes must be playing a role in futures markets, options must be in turmoil etc, but at the end of the day, this entire fiat-based pile of rubbish - aka “The Major Financial Markets of the World” - is probably still going to shed a lot more value; thereby bringing it back in-line with ACTUAL value generated by the economies of the countries.

This is interesting: already we have seen the large effect that losing access to China has had on the manufacturing industries of the world. Lazy and decadent Western Economies have done a great job of turning from manufacturing to finance in order to grow their over-inflated fiat money bubbles. That outsourcing manufacturing decision may be about to come back to bite them - hard!

It is a pity that I so often find myself turning to China as a “good example”, but this post is no exception. As much as I hate Communism, the oppression of people and anything “anti-Liberty”, I can not deny that the dictatorial policies of China have allowed it to gain the upper hand over the virus. Not only this, but China’s manufacturing sector is literally second to none. While other country’s markets (built on unbacked fiat money and the ethereal promises of politicians) are falling, China and its real production-based economy is sitting pretty.

Giving away your manufacturing capabilities is a major strategic blunder for any country. Those who have done so are getting what their greed deserves.

Fiat money itself is about to become a whole lot more available. Interest rates are falling of a cliff - to the point where we are getting seriously close to the situation whereby:

banks will charge you to hold your money for you, and
banks will pay you to borrow money from them.

Don’t laugh - watch this space...

Talking about fiat money becoming available: expect the “not QE” as well as real QE to kick into full swing. I am anticipating that central banks will be minting A LOT of new money over the next few months. It goes without saying that this attempt at breathing life into failing fiat economies will:

Fail.
Be hyper-inflationary.

Of course this all plays beautifully into Bitcoin’s open hands. Yes yes, Bitcoin has also dropped radically in price, but all that’s happened is that the recent crypto-hype factor has been removed from the market. Bitcoin has dropped back down to its long-term base trendline, a line which has been on my charts for years (literally). As you can see, it’s right on target and there is nothing to fear from a crypto perspective.

The long-term base trendline represents the value of Bitcoin when there is no hype in the market - that's its job. Because Bitcoin is growing at a predictable rate and is a scarce asset, this growth can be plotted on a chart. Trust the trendline:

No, BTC did not manage to buck the trend and perform as a flawless store-of-value, but then, did anyone expect it to? We know that BTC has yet to reach Gold’s level of maturity, and for now it’s behaving more like Silver or Platinum. I’m absolutely fine with that. I’m also confident that my BTC long-term base trendline will hold, or at least form a very buoyant support level that BTC won’t be able to drop below for long. Occasionally BTC wicks below the trendline, but it seldom breaks it. The longest “break” was in Q3 of 2015 when BTC spent 2.5 months hovering below that level.

Virus or no virus, BTC IS money and it DOES store value and it IS scarce. It will ALWAYS increase in price in the long-run - at a rate broadly supported by the long-term base trendline. In the last year or so, that trendline has only required very minor fine-tuning from me. At the end of the day it’s only a line on a chart and a “perfect storm” of circumstances can break it on a temporary basis - but I am confident when I say that I believe in that line.

Last but not least, the altcoins are doing well. By “doing well” I don’t mean that they are increasing in fiat value, but rather that they are not haemorrhaging BTC value, as altcoins are inclined to do during a bear market. Altcoins have generally either held value or gained value against BTC in 2020 - a trend which Covid-19 has failed to change. That’s not surprising considering how grossly oversold most altcoins still are. If I manage to get my hands on some money, I will not hesitate to put much of it into my altcoins portfolio.

Take care out there.

Always remember the immortal words of Douglas Adams: “Don’t Panic”.