What is Bitcoin telling us? | 31 December
BTC Bitcoin Price, Weekly Bitcoin Price Risk Analysis Forecast
(Previous week in brackets)
|Trend||↑ (↑)||↑ (↑)||↑ (↑)|
|98 (95)||94 (93)||95 (89)|
|Allocation Limit(0%)||Invested||0% (0%)|
31 December: Bitcoin has been 'all systems go' for most of the past three months. As of writing on Jan 3, 2021, BTC had another 3 day lift off to a n intermediate high of $34,700 adding another massive 20% since Dec 31 making this a one year 375% advance and creating a market cap close to $750 Billion. What is this telling us?
All crypto currencies and many related tokens have advanced to a similar extend, including our favoured rewards backed BEST token which added 250% the past year. Ethereum added over 500%, Cardano 400%, Litecoin 225%, The Bitcoin Cash airdrop increased 60%.
Why are these markets so hot? One reason only, price is going up rapidly. Very few people understand why this happens whilst the hard push narratives from rather wealthy early adopters have brought along new Wales and institutional funds and have now also reached small retail. Small investors, $500-$20,000, that are coming in as massive crowds seeking a free lunch in a 24/7 market. If a million people invest $1,000, for argument sake, the $1 Billion investment will have a huge effect on price discovery. The problem is that most small investors almost always loose. They enter late and exit late, which means buying high and selling low. Markets do that to people and especially runaway markets like the top 10 crypto currencies that are all benefitting. If these crypto currencies win the day, and they might, this would be an exceptional economic stimulans and extremely inflationary.
We have to admit that the pshychology of these new digital markets linked to fiat currency has become very interesting. They are probably telling the story of a monetary system that has failed to correct itself.
If anything we would favor Ethereum for the simple reason that it can technically be used as money. Bitcoin cannot as it is too costly and too slow. Technically Bitcoin still looks very high risk and this shows that once markets start to move up perpetually cannot be traded short term without the risk of loosing massive opportunity or loosing most of the invested capital.
Let us just remind again what happened with Tulip bulbs in the Netherlands in 1637. These flower bulbs originated from Asia were actually imported from Asia and these tulips florished on Dutch soil with prices for the bulbs starting to rise slowly due to strong international in the early 1600's. In the mid 1620'2 one tulip bulb would sell for 1000 florins. Average annual salary then was 150 florins. It got worse and for many years contracts on future bulb deliveries changed hands on exchanges and in café's and same contracts often traded 3 or 4 times a day at ever increasing prices. The tulip market was controlled by professional speculators even though this type of open market trading was forbidden. The 1635 Pest pandemic fueled further price increases again and certain bulbs were traded at between 2500 and 6000 florins. A current equivalent of about €1,500,000. Over 5,000 people, about 1% of the working population, were involved in trading the bulbs until 1637. The rest of the population turned against the speculators as it was seen as 'sin', greed and blasphemy. Public opinion was strong enough that on Febr 3 1637 there were only sellers left. Total chaos arrived and most traders were left with contract that could never be met. The market price quickly dropped and well below a goverment agreed legal settlement of 3.5 cents to the dollar or 3,5% of the contract value. More market hypes have surfaced during the ages and one can sense that we are witnessing a similar hype right now. Bitcoin is trading at $33,700 at close of writing. Wow, but no Change.
27 December: Bitcoin is clearly the star investment of the century hitting 28,400 today. It is best tasting piece of chocolate ever and is becoming an addictive pleasure. The narrative in the crypto industry is that Bitcoin represents the only alternative to fiat money in a controlled monetary system that has lost nearly all trust amongst financial market participants. As Decrypt writes, this surge has a number of key reasons.
- Growing demand and limited, maximised supply
- Major volume demand from insitutional and large UHNW investors
- Bitcoin halving
- PayPal offering crypto facilities
Unfortunately there is zero fundamental economic backing other than the narrative from major financial market influencers driving the price.
This may indeed be a one way street making a few million people very wealthy and many more millions fairly well off, on paper at least. We must wonder however where and how this will end? This unprecendented and potentially unlimited advance will likely become a very disruptive phenomenon in international monetary history. Or will it become the ultimate hyperinflation trigger that many have been worried about for the past 10 years? Or is MMT the new normal. A price race to the moon without backing simply has no logic, but as long as monopolist monetary authorities do not step in, for whatever reason, the kind of heavy buying of late, especially at these already elevated levels, can only lead to further exponential increases. With that in mind one must invest in Bitcoin of course. But that doesn't change the many potential risk elements associated with the effects on different cultures. Will Bitcoin change our social life or desires? Clearly many more smaller investors, or even the die hard anti-Bitcoiners, will be driven into purchasing Bitcoin as human greed needs to be released. The rally that started 3 months ago has seen the price triple already, which will by definition cause diversification into many lagging asset classes, or new asset classes represented by crypto tokens. No doubt a very interesting universal development, but also scary. We do not change our view on risk, but may prove totally wrong in the end and missing the out of the box better alternative to building a wealthy society without wars. No Change as we still think that gap at 2800 needs to be filled. Maybe never or only after reaching one BTC = 1 billion dollars.
Bitpanda Pro - BEST Token Price Risk Analysis
(Previous week in brackets)
|Bitpanda - BEST/EUR||LT-M||MT-W||ST-D|
|Trend||↑ (↑)||↑ (↑)||↑ (↑)|
|84 (84)||91 (88)||89 (81)|
|Allocation Limit(10%)||Invested||100% (100%)|
Bitpanda BEST token
31 December: BEST traded 14% higher for the week at year-end close at €0,1733 and has since seen a market top this first Jan weekend of €0,21 or 20% up since Dec 27. Full year open to close advance is 250%. The recent activity is of course largely fuelled by the crazyness of the crypto currency market. The big difference being that this is a regulated exchange (BITPANDA) controlled token which offers BEST investors premium rewards for trading on the Bitpanda exchange. New developments like the Pantos project and the Austrian RaiffeisenBank coin development may also give this exchange a serious boost in the race to more crypto efficiency. Bitpanda is the leading crypto exchange in Europe and open to European investors. Dec 2020: Latest Bitpanda Techhub investment.. Possibly seeking to increase our 2019 initiated position again on any price drop leading to bullish divergence between short and longer term time scales. No Change.
27 December: Bitpanda’s Ecosystem Token rapidly increased some 60 percent the past 3 months and unlike Bitcoin has tangible characteristics offering commission discounts and rewards. This is our long term choice to participate in the developing token exchange industry as we believe that only fully regulated organisations will be the future for tokenised assets. Whether Bitcoin is going to play a major role in this developing industry, which it clearly does today, is not relevant. The Fintech market will be so much bigger than that and ultimately dominate all commonly adopted financial industry systems. Technically this market looks overbought Short and Medium term and may experience a pause. A correction of this small Market Cap token could create quite a bit of demand again With Bitpanda account holders in Europe as it did recently. As this asset is young we cannot yet do a proper Medium term and Long Term analysis. Beware, BEST is as volatile as most crypto’s. Best is a ‘Hold’.
S&P 500 Weekly Standard & Poor's 500 Price Risk Analysis Forecast
(Previous week in brackets)
|Standard & Poor 500||LT-M||MT-W||ST-D|
|Trend||↑ (↑)||↑ (↓)||↓ (↓)|
|90 (90)||96 (93)||85 (86)|
|Allocation Limit(30%)||Invested||0% (0%)|
31 December: S&P is up one percent during the final week of the year closing within 0.1% of the all time high earlier in the week. An extremely strong performance with a 2020 open to close advance of 16%. That of course dwarfs the crypto returns which is why several big industry influencers have moved some of assets under management into Bitcoin and other crypto currencies and tokens. As long as these equity markets continue to rise there is no technical tool that can predict timing. This is one reason why it isn't worth the risk. Losing opportunity isn't hurting of one can preserve some wealth via other asset classes. We have chosen for Precious metals, 55% and BEST, 10%. No change.
24 December: All shine is of course on Bitcoin this week, whilst S&P Daily is correcting down possibly building another bullish divergence. S&P proably will need to correct a bit more even though everything under MMT influence appears a high risk one way street. High risk technically means no investment. With weekly now turning down, risk of corection has again increased. No Change
Brent Crude oil Weekly Brent Crude Oil Price Risk Analysis Forecast
(Previous in brackets)
|Trend||↑ (↑)||↑ (↓)||↑ (↓)|
|51 (50)||92 (92)||69 (86)|
|Allocation Limit(10%)||Invested||0% (0%)|
31 December: Brent ended the year on a positive note but still 9% below the opening in 2020. The world economy, mainly as a result of the Covid pandemic, is not in good shape and unlikely to return to normal for some time to come. Brent crude, being a mature asset class, will not keep pushing higher like crypto's if short and medium term technicals are at high(er) risk, like medium term Weekly risk weight is right now. The overall technical picture is still not that promising. Hence no Change.
24 December: Oil prices performed fairly strongly last week with Daily risk slowing the downtrend with some bullish divergence possible. Overall risk with Weekly at overbought level and Monthly looking to pause in neutral position remains unattractive to invest. No Change.