Investing in the Tulip Crypto Mania
I have always been skeptical of having any meaningful exposure to crypto's for the fundamental fact they have no intrinsic value, no earnings, backed by nothing, where at least the fiat currencies are backed by each nations tax payers and military. A store of value I hear you say? Well you cannot call something a store of value if it can double or halve within a matter of weeks which is what Bitcoin has done THIS YEAR! What's that? Bitcoin supply is limited to 21 million unlike fiat which is unlimited supply with the worlds central banks printing press going 24/7 at full speed. Yes it is true that fiat currency is continuously being devalued but along with Bitcoin there are what? 12,000 additional CRYPTO's, so called Alt Coins and smart contracts, reminds me a lot of mortgage backed securities giving the illusion of safety from money printing when in reality they are the exact opposite, leveraged up to the hilt where just like the subprimes it does not take much to bring the whole house of cards crashing down, hint USDT.
And then there are some really loony crackpot ideas that the many have fallen for hook line and sinker such as CHIA COIN that is busily soaking up the worlds supply of hard drives populated with tens of 100gb files each all for the chance to win a pair of chia coins in the 4608 daily CHIA coin lottery, in fact I consider CHIA to be a SCAM as I will elaborate on later. Then we have the GPU mania, the worlds stock of GPU's gobbled up mainly by Ethereum by 'miners' investing tens of thousands of dollars in mining rigs, hoping that the ETH price will stay high for long enough to get a return on investment which has sent the price of GPU's soaring to ridiculous levels, double, even triple MSRP, with 3 year old GPU's selling for more than what they cost when NEW!
Then there is the fundamental issue of how to value the likes of bitcoin, and as far as I can tell one cannot value it, it is pure speculation, does not matter if the supply is limited to 21 million, those 21 million bitcoins could just as well be valued at worth $1 than $1 trillion!
So the crypto's, regardless of what the crypto enthusiasts that flood the internet with their perma HODL messages are VERY HIGH RISK! Even worse one cannot spread ones risk to a basket of crypto's because they are all basically riding on the coat tails of Bitcoin i.e. whatever Bitcoin does up or down then the others will do twice more! So I consider investing in Crypto's as being very high risk, much higher than investing in a small cap stocks such as featured in my recent article. As at least there each has a real chance of making it, than all being directly correlated to Bitcoin. Which translates into Crypto's being assets that should NOT be held for the long-run, at best for the duration of a bull cycle as there is always the risk of the Emperor has no Clothes event happening i.e. the likes of Bitcoin could become worthless literally overnight as I will elaborate upon how in this analysis.
So Crypto's are HIGH risk, however to offset that high risk they offer high potential returns, especially during the mania peaks! As long as one does not get sucked into the crypto hype than one should be able to profit from the crypto booms by buying during the busts hence this article as we are at the beginnings of the great Crypto bear market of 2021, regardless of the what the likes of Cathy Crypto Wood pronounces such as Bitcoin bottomed at $35k.
So BUY LOW and SELL HIGH 'should' work with the more liquid of crypto's just as it does with most markets most of the time hence this timely analysis that seeks to present my accumulation strategy for what I am going to do over the coming weeks and months as well as the potential risks that could deliver huge flash crashes to the crypto world. So far I have limited myself to mining ETH with payout's in BTC with a couple of desktop PC's though knowing that bitcoin was going to CRASH and enter a bear market have ensured that the bulk of crypto generated has been SPENT.
DISCLAIMER - Investing in Crypto's is VERY HIGH RISK, all the way from putting funds on deposit with exchanges to the actual holding of crypto coins Therefore the analysis in this article is a matter of opinion provided for general information purposes only and is not intended as investment advice. Using Information and analysis derived from sources and utilising methods believed to be reliable, but I cannot accept responsibility for any trading or investing losses that may be incurred as a result of this analysis. Individuals should always consult with their personal financial advisors and do their own research before engaging in any investing or trading activities.
Topics covered in this analysis:
- Investing in the Tulip Crypto Mania
- Bitcoin Price Trend Forecast Review
- Lessons Learned
- Cathy Crypto Wood's View on Bitcoin
- BITCOIN HALVINGS TREND TRAJECTORY
- Stock to Flow Infinity and Beyond!
- Bitcoin, Crypto's and the Inflation Mega-trend
- Black Swan 1 - Will Crypto's Get Banned?
- Black Swan 2 - GOOGLE
- Black Swan 3 - USDT Tether Un-Stable Coin Ponzi Schemes!
- BLACK SWAN 4 - Bitcoin 51% Network Attack by China?
- Black Swan 5 - Bitcoin is Already Obsolete
- US Trending Towards Hyperinflation
- BITCOIN TREND ANALYSIS
- Bitcoin Bear markets analysis - How low could she blow?
- Bitcoin Trend Forecast
- Bitcoin Long-term probable Next bull market price target
- Alternative Scenarios
- My Crypto Bear Market Investing Strategy
- Crypto 1 - Ethereum (ETH) $2600
- Crypto 2 - Bitcoin $40,375
- Crypto 3 - Ravencoin $0.078
- Crypto 4 - Cardano $1.59
- Crypto 5 - Pokadot $25
- Crypto 6 - ChainLink $26
- Crypto's 7 to 10
- Creating The Perfect Crypto
- How to Invest in Crypto Without Getting SCAMMED
- CHIA SCAM COIN
- Binance vs Coinbase
- Have ARK Invest Funds Bottomed?
My primary focus is to fund the accounts and set the limit orders for the accumulation phase during the crypto bear market, following which I will rinse and repeat for the distribution phase of the next bull market as I don't buy into the hype that crypto's such as Bitcoin and Ethereum will replace fiat currencies or that Bitcoin is as good as Gold. We'll Gold's done diddly squat in terms of being a save haven if you go back and see what the gold bugs have written during the past decade then the Gold price today should be trading over $10k! The same could happen to the crypto's i.e. they hit a ceiling in terms of speculative interest given that neither generate earnings unlike stocks. So I cannot see how the decentralised crypto's are ever going to be as big as the hype implies as of courser the governments can and probably will adopt block chain technology in favour of their own centralised crypto's that will be backed by tax payers and thus supplant much of what today's crypto developers can ever hope to achieve.
So I am aiming to invest upto 1% at the right price in a small basket of crypto's for about 2 to 3 years., and who knows I may get lucky and double or triple or more my money for maybe a 50% risk of loss of funds invested and of course one can fantasise about crypto's X10ing again just as they have in the past.
Bitcoin Price Trend Forecast Review
Before I venture down the crypto rabbit hole in attempts to map out a potential multiyear trend forecast, here's a review of how my previous Bitcoin trend forecasts panned out.
17th Sept 2019 - Bitcoin Price Analysis and Trend Forecast
Therefore my forecast conclusion is for the Bitcoin price to hold support at $9,400 in preparations for an assault on $12k, a break of which would target a break of $14k. However if support at $9.4k fails than Bitcoin could trade down as low as $6k BEFORE heading higher.
Peering into the Mists of Time
It looks probable that Bitcoin will be trading at new all time highs, north of $20k during the second half of 2020. And if the price goes parabolic as Bitcoin has a tendency to do then $20k could be a mere blip in a much more aggressive bull run.
Which I updated in March 2020
4th March 2020 - Coronavirus Parabolic Pandemic, Bitcoin Price Trend Forecast
My forecast conclusion is for the Bitcoin price to mark time by trading down to as low as $7,500 before basing for a run higher to resistance of $10,500 that 'should' break to propel the Bitcoin price towards the next resistance level of $12,000. Thus the bitcoin price could drift lower for the next couple of months or so before resuming a bullish trend as illustrated by this chart.
Whilst my most recent quick take penciled in a target accumulation zone of between $19k and $22k after spending several months warning not to hold any crypto as Bitcoin traded along it's Q1 highs
So $19k to $22k is where I would consider accumulating Bitcoin which I will develop further in my next analysis that I aim to soon complete and to include a strategy of what to do during an anticipated crypto bear market, of what crypto's I will be looking to accumulate at much lower prices than where they trade today with a significant amount of holdings generated via GPU mining, but for which we have plenty of time as I expect the bear market for most crypto's to run for a good year or so from peak to trough, so I am in no rush to panic buy on chaotic price action.
And this is what has transpired to date over the past couple of years.
Bitcoin traded down to $4k before going higher to $20k, breaking above $20k late 2020 to go parabolic before Bitcoin peaked along it's early 2021 highs and has now entered into a bear market that this analysis will seek to fine tune the probable destination of in terms of price and time with objective of replicating a similar outcome in terms of accuracy as my preceding bitcoin analysis.
Bitcoin price can tends to go a lot higher AND lower than anything that can be concluded from technical analysis, very high volatility i.e. it traded to well below $6k before bottoming and traded to well above $20k before topping where I personally thought in a parabolic move it could hit $50k as a far distant price target that it eventually exceeded by 15K to top out at $65k earlier this year. So to factor a higher probability for more distant price targets than technical analysis suggests.
Cathy Crypto Wood's View on Bitcoin
Virtually every one of Cathy Woods crypto videos this year has her restating that she expects Bitcoin to hit $500k, and a few mention an Ethereum target of $10,500. As in her recent video she reiterates Bitcoin going to $500k and that Bitcoin probably bottomed at $35k (https://www.youtube.com/watch?v=oT3vGInOjyY) And apparently in the not to distant future many millions of homes will have Tesla power walls and solar panels all for mining crypto's such as Bitcoin and ETH, so Cathy kills to birds with one stone, pumps Crypto's and Tesla at the same time!
Bitcoin $500k, if only things could be so simple! The ultimate free easy money, Sounds too good to true and so I am skeptical that it's ever going to happen! Still it gives a taste of the mindset of the crypto community, a case of HODL for $500k!
BITCOIN HALVINGS TREND TRAJECTORY
The supply of bitcoin is capped at 21 million coins. Imagine what would happen to the price of Gold if no more Gold could be mined, that's the trend trajectory that Bitcoin appears to be on i.e. there will come a time when NO MORE bitcoin can be mined!
So the simplest thing to do would be to to buy bitcoin when cheap and forget about it for a decade or so and then likely see a return of X10 that which one paid for it.
Total bitcoins mined to date number 18,700,000, 210,000 blocks will be mined from May 2020 to roughly March 2024, totaling 1.3 million bitcoins, which implies a total of 20 million bitcoins by the time of the next halving of rewards for miners to 3.125 bitcoin rewards per block mined (block rewards to miners is how the block chain works).
Which implies by 2028 to expect the bitcoin supply to increase by only 656,000 to roughly 20.65 million, then what? the next 4 years to 2032 will see only 328,000 new bitcoins produced that will take the supply to very close to the 21 million limit.
What this means is that price for transacting in Bitcoins is going to continuously become more prohibitive in terms of transaction fees in response to which bitcoin developers are developing layers on top such as the Lightening Network by doing transactions OFF the block chain, much as exchanges such as Coinbase seek to do i.e. transactions between other exchanges incur block chain transaction fees.
What this implies is that Bitcoin is going to gradually start to seize up both in terms of supply and demand, i.e. miners won't be able to generate rewards and fees to cover their hardware costs and those who transact in bitcoins won't be able to afford the transaction fees.
So how will the Bitcoin developers square this round peg?
By Wrapping Bitcoins into other crypto's namely Ethereum as one solution currently being implemented so most of the transactions will take place off the block chain which then risks the creation of fiat Bitcoins! Which is probably already happening to limited degree. FIAT BITCOIN!
Clearly I am going to have to do a lot more pondering to try and divine what happens as Bitcoin approaches that 21 million limit. Perhaps developers decide to break all the rules and increase the supply of bitcoins, after all it is just code that can be reprogrammed if enough bitcoin holders agree to the change to implement it. Still in the meantime it appears that Bitcoin is on an inevitable long-terms upwards curve that gets accelerated around each halving of miner rewards, hence why so many are bullish about bitcoin in the long-run as the fundamental pattern for the bitcoin price is to surge higher following each halving in miner rewards at each 210k blocks mined with roughly the next halving due around March 2024 and then Mid 2028 that resolves in the following pattern.
- Bull market in advance of the halving of about 1 year.
- Bull market after halving's of about 1 year, as we experienced Since the May 2020 halving.
- Bear markets to the previous halving's bull market high so targets $20k
- Next halving at approx $130k
- Next Bull market could peak at between $500k and $600k
- 2028 Halving at approx $1.4 million.
Jeepers creepers! Can this pattern really continue as is ? Usually the more often a pattern repeats the more likely it is to fail next time as too many people will be expecting it to repeat.
What I expect to eventually happen is that Bitcoin hits a ceiling where it could remain stuck below for decades. Now the big question mark is where will that ceiling price be? Let's hope it's not already happened at $65k! Remember folks, in 1980 when Silver hit $50, where do you think precious metals investors thought Silver would trade to in future bull markets? I'd imagine a lot higher than $50!
Anyway before we all rush out and buy bitcoin, there is still the bear market to contend with which on face value implies $20k is probable.
Stock to Flow Infinity and Beyond!
Once you venture into the realm of bitcoins future prospects then you are pretty soon going to be presented with Stock to Flow model projections. Which is basically how many years will it take for new annual supply of bitcoins to cover total available supply of bitcoins and what it suggests for future pricing given that Bitcoins future supply is reducing with each halving.
The stock to flow model suggests Bitcoin hitting $1.3 million during late 2025, sounds possible given what we have already seen happen but continue along this curve and we get to Bitcoin valued at $325 billion PER coin by 2045! Seriously, $325 billion per coin! In that case buy 1 Bitcoin at $40,000 today and then in 20 years time be richer than Jeff Bezos is today! This is what happens when people swallow their own hype. Clearly the stock to flow model is a load of crypto BS, not worth wasting any more time on.
Bitcoin, Crypto's and the Inflation Mega-trend
Where's the link? I don't see it. Which to me suggests that right now and maybe well into the future bitcoin and the rest of the crypto's are basically play money, outside of that which is leveraged to the Inflation Mega-trend. Akin to pyramid schemes where those who create and invest in the coins at start and hoard a large percentage of the coins basically can reap huge rewards the converse is that someone's got to lose and that's the Johnny come lately crypto traders and investors who have been convinced by hype that crypto's are the best thing since sliced bread.
I am not seeing a link between the real world i.e. the Inflationary mega-trend and Crypto's, so I treat crypto's as play money, yes I am mining which is giving me FREE crypto's, which at the current rate of exchange is FREE money. As long as I get a decent amount of free money for the inconvenience of the cooling fans running a little louder than normal then I will continue mining, and spending what the mining yields. But I am wary of investing in crypto's, because they are pyramid schemes.
You see the thing about stocks such as Google, Microsoft and Amazon is that I am pretty confident that any drop in stock price will be temporary because these corporations are growing their revenues and profits. With the likes bitcoin there is NOTHING there! Other than being charged GAS fees whenever one transacts in the crypto which for bitcoin is about $60 and $160 for Ethereum. and they call this a currency? Imagine going to buy a $5 cup of coffee and getting charged an extra fee of $xx, that's what it's like trying to transaction in Ethereum right now.
Today's get rich craze are crypto currencies, what will it be tomorrow? Probably something linked to climate change.
BITCOIN BLACK SWAN EVENTs
Will Crypto's Get Banned?
Whilst we can all get carried away projecting into the future based on past trends, comfortable in the reliability of calculations. However, there are always black swans lurking out of sight that could result in that panic event that few see coming. And where Bitcoin and the crypto's are concerned is if the Governments decide to BAN trading and investing in crypto's.
I know the crypto bugs will come out with statements such as it is impossible to ban decentralised crypto currencies.
However, bitcoin / crypto's threaten the fiat currency banking system that effectively the worlds central banks have a monopoly over.
So this could go one of two ways or spectrum of each.
1. The governments embrace Bitcoin and effectively nationalise it by making it an reserve asset.
2. The governments seek to outlaw crypto's and also seek to supplant the block chain technology with their own for instance the US Fed Coin, which is centralised banking. So that bitcoin and crypto's remain largely relegated to the sidelines and never achieve the dominance that crypto bugs assume as inevitable.
Cannot happen? Well India is doing that today, seeking to outlaw bitcoin!
Turkey banned crypto payments.
Thailand has ordered crypto exchanges to delist meme coins such as Doge coin.
At this point in time what is most likely to happen is a mixture of the two.
1. Bitcoin becomes a reserve asset if not for the banks then for corporations.
2. The Fed and other central banks implement their own block chain centralised crypto currencies's backed by the tax payers of the state. These coins will be palatable to the bulk of citizens of each nation.
For instance most moms and pops are going to be scared shitless when told that if you send you coin to the wrong address it is gone forever or you forget your password all your coins are lost for good!
Whereas a centralised banking system based coin offers the safety of a transaction chain so that errors can be undone which given that most people are not engaged in illegal activities will be happy with, so they get access to the benefits of crypto currencies without the risks of price volatility and perhaps as they become more educated in they will begin to use exchanges such as Coinbase that acts as a middle man that stores their crypto in various currencies in a sort of safe place as compared to personal wallets which if lost one loses all their Bitcoins on the block chain.
Whish is why I view the likes of coinbase stock as a good long-term investment as the masses have yet to awake fully to what the block chain has to offer with a lot of innovation to follow in this field over the coming years that Coinbase will profit from.
So understand this the governments will seek to make bitcoin less desirable then their fiat currencies and coming block chain versions of fiat currencies such as the US dollar. The government has a multitude of options to play with such as various taxes when people try to transact with crypto currencies i.e. buying cars or property.
The only way to capitalise on bitcoin / crypto's is to keep transactions outside of the financial system, as soon as it enters the financial system by means of a transaction that involves fiat currency then it becomes trackable and taxable. Which is why I spend the little bitcoin I mine on services paid for in bitcoins.
For me the only way a traditional bitcoin investment could work is if it can be held it within a tax free wrapper such as a SIPP or ISA. Unfortunately the government has been locking down that loophole for instance the UK has banned the holding of bitcoin / crypto funds within ISA's and SIPPs. Hence options such as Coinbase stock is so valuable in terms of gaining tax free exposure to crypto currencies.
As a reminder in the UK one can invest tax free upto £20k per year into a Shares ISA PER adult. And a total of just over £1 million in a SIPP, though effectively one would want to stop investing in a SIPP once the SIPP value gets to about half the limit, so currently about 550k. Which combined should be more than enough for most investors, especially couples. And of course any increase in the value of the home you live in is tax free.
Black Swan 2 - GOOGLE
The stock to flow model to is too easy and that Bitcoin halving can do what it does to pump the price ever higher, but what happens if next time that does NOT HAPPEN where instead bitcoin pricing rising it FALLS! If the biggest bullish case for Bitcoin turns out to be FALSE then that crypto is heading towards $1 rather than the stock to flow models $1 million plus coins.
So yes, it worked last time, and could work next time. However, on it's own it has to be coin flip, and eventually those coins are going to flip TAILS - GAME OVER!
Which means don' get sucked into such hype and make sure not to over commit to the crypto casino i.e. Even at maximum exposure I am not going to spend MORE than 1% of my total fiat on crypto's. One has to be prepared for assets that have no intrinsic value to reflect that lack of intrinsic value so keep exposure small.
I am skeptical of the S2F model, reeks of Elliot wave theory and how its all hunkey dory in hindsight but actually going forward it's basically a coin toss which is how I expect the model to play out, nothing is certain so yes there WILL be a halving where the stock to flow model FAILS, which is not something you are going to hear anywhere else because the vested interests have bought into their own hype. Still I cannot ignore that a stock to flow pattern exists, but am fully aware that next time it could FAIL!
So what could kill the stock to flow model and bitcoin and most of the others crypto's along with it?
Well okay maybe not Google itself but what it and the other tech giants and several nations are working on could, namely Quantum Computers!
The problem is this, the most important aspect of the block chain is SECURITY of transactions and records of which public key holds what with the private keys kept safe and secure to authorise transactions. All's well as long as the private keys cannot be generated from the public keys which using regular computers, even super computers is practically impossible given that each new blocks hash is generated with reference to the preceding block hence the block chain.
In step Quantum Computers and their super position ability to solve exponential equations.
What does this mean for bitcoin and most crypto currencies?
That they effectively have a shelf life, of what? 10 years? 12 years? Before Quantum Computers make them obsolete. Though there will be realisation long before that day arrives that Bitcoin's goose is cooked that will result in a max exodus from Bitcoin with the price rather than being worth $325 billion per coin will be more like 3.25cents per coin, making their Bitcoin tulips pretty much worthless.
And with the mad rush to exit Bitcoin so will all other crypto's collapse towards zero in the greatest crypto crash blood bath in history, especially if that realisation comes in the run up to a mania peak! If it's during a bear market that is well underway than maybe some sanity will come to the rescue of the block chains as workarounds to secure block chains against quantum computers will be developed., but during a bubble mania Quantum Computers would be the needle that pricks the crypto blockchain bubble. Which will see what happened to the price of Tulips replicated to what happens to the Price of Crypto's falling from $1 million to under $10 within days. That's the state of the crypto world today, a case of stock to flow plain sailing to Bitcoin $1 MILLION+
All whilst the Quantum clock quietly tick tocks all the way towards EXPLODING the blockchain, your Crypto Black Swan event.
Black Swan 3 - USDT Tether Un-Stable Coin Ponzi Schemes!
To get my crypto bear market investing ball rolling I recently opened an account with Binance (10% trading fees discount link). Deposited £3600 sterling that I quickly converted into USDT so as to initiate my initial limit orders on mainly BTC and ETH, aiming to add more funds and limit orders over the next few weeks. Unfortunately on taking a closer look at USDT Tether stable coin which probably holds true for most of the other so called stable coins, I find that USDT is NOT backed 1 for 1 by that which it seeks to represent i.e. from what I have gleaned at best USDT is backed by 75% of dollar 'safe-ish' assets with most of the remaining 25% may not even exist i.e. PRINTED MONEY! Likely to cover losses incurred to date such as the $800 million USDT's parent company lost some years ago etc,. So USDT's true value is somewhere between 15% and 25% LESS than that of the US Dollar given it's actual reserves as I covered in my recent video, and the backing could be far worse as exchanges use USDT to allow traders to trade on margin and thus are vested interests in perpetuating this scam..
The black swan event here is clearly that USDT and the other Stable coins could spectacularly FAIL and trigger a collapse in the crypto markets as investors see their USDT values evaporate overnight whilst those who's exit plans relied on stable coins in times of market panic are left, well panicking as they are stuck in crypto's so panic even more as they fear exchanges imploding along with their crypto balances.
Stable coins current market cap is $104 billion, most of it in USDT $64 billion and USDC $22 billion, thus are more than capable of creating a financial crisis 2008 style event for the crypto markets. That should they collapse would result in a loss of confidence in all crypto which could easily take Bitcoins price down by 85% from it's peak to say back under $10,000 with worse for the other crypto's! A true bursting of the crypto bubble in spectacular style, a risk that most crypto maniacs with their DIAMOND HANDS HODL mantra remain oblivious to.
Furthermore printing money i.e. USDT allows for MARKET MANIPULATION! as USDT can just print dollars out of thin air then buy crypto to send prices soaring and thus generate artificial profits with printed US Dollars used to push up the price of crypto holdings, it may have worked during the 2021 bull run, but it is an ultra case of the "Emperor has No Clothes" all whilst the crypto fanatics talk about Crypto's being safer than Fiat currency that is being constantly devalued via central bank money printing. In fact Tether is behaving just like a CENTRAL BANK for the exchanges i.e. prints currency (USDT), unredeemable, manipulates market prices, allows traders on exchanges to leverage themselves upto their eyeballs upto X100, so much for crypto's being decentralised finance!
In fact Tether exploding is not a question of IF but rather WHEN! And the exit door is going to be pretty small. So at the very least understand that there are NO STABLE COINS, they are UN-STABLE COINS! No matter what they state on their websites etc they are ALL UNSTABLE due to the fact that if USDT fails then they will ALL FAIL, just as when Lehman Brothers failed ALL the banks FAILED! And this time there isn't going to be any central bank stepping in to bailout out the crypto world. IN FACT, I would be surprised if the central bankers are not already aware of this and could be game playing a collapse of the crypto space so that they can step in and seize control of the crypto markets through strict regulation to prevent anther Tether style collapse of the market.
Meanwhile all of the exchanges use the Stable coins as a means of sucking fiat currency into FAKE unstable equivalents which gives retail investors the illusion that they are holding for instance dollars when they are in fact holding something akin to mortgage backed securities and we all know what happened to those!
Seriously folks the more I look under the hood of Tether the more I am convinced that a chain reaction of events could result in a sudden loss of confidence in USDT that would result in a collapse of the whole crypto market within a matter of hours.
USDT is 9-11 for Central Banks
The central banks cannot allow independant currencies to circulate in any meaningful amount regardless of the advantages of the blockchain. SO, turning a blind eye to the USDT ponzi scheme on expectations that it WILL implode and thus allow the central banks to step in and REGULATE the exchanges and to some degree crypto currencies in the name of preventing such ponzi schemes in the future form collapsing crypto markets explains why USDT has got away with it to the extent it has. The central banks full well understand what's going to happen and so are turning a deliberate blind so that in the aftermath they can wage their war on crypto without much resistance from a devastated crypto market and without any cost as unlike the banking system they do NOT have to bailout the crypto shadow banks i.e. a collapse of Tether will have NO effect on the banking system so let it grow until it takes down the crypto markets. Which is a another reason to be careful in how much one has deposited on exchanges and not just held in USDT. Investing in crypto's IS VERY HIGH RISK!
BLACK SWAN 4 - Bitcoin 51% Network Attack by China?
A 51% attack is when a mining pool controls 51% or more of the computational power of a network which can then create fraudulent blocks of transactions for themselves while invalidating the transaction of others on the network. Whilst we are a long way from such an event i.e.here are the top 10 pools and their percentage share of the BTC compute power (hash rate share).
However, the problem is that there will be fewer block rewards and less transaction fees which means fewer miners hence larger pools couple that with services such as Nicehash that sell hash power which means an orchestrated 51% attack for a short period of time, say an hour or so is possible where the waters have been further murkied by hash rate derivatives, you know the likes of which caused the financial crisis of 2008, so whilst on the surface bitcoin may seem safe and secure, however under the surface we have no idea of what is bubbling away only to become aware during an Lehman's moment!
Meanwhile those who state that a 51% attack could never happen need to understand this that today over 60% of bitcoin mining is done in CHINA, and that the chinese government is hell bent on outlawing bitcoin in CHINA due to the fact that -
a. Mining consumes immense amounts of energy.
b. That china is in the process of circulating it's own centralised digital currency so does NOT want an decentralised competitor to it in circulation.
Therefore the Chinese government has it in it's means to orchestrate a 51% attack by commandeering Chinese mining operations and effectively KILLING bitcoin and along with it most of the crypto markets that I am sure western governments in secret will by more than happy to see happen.
Black Swan 5 - Bitcoin is Already Obsolete
Bitcoin is first generation blockchain, Ethereum is 2nd Gen with the likes of Cardano being 3rd gen blockchain tech. Bitcoin has already faded as a currency because it just does not work i.e. given transaction fees, number of transactions per second and the amount of time taken to complete transactions which is why most of the crypto business is actually done in Ethereum, which is working towards a major update in ETH 2.0. The clear danger here for prospective bitcoin investors is that we may already have seen peak Bitcoin as speculative and block chain technological interest continues to drift towards other crypto currencies leaving Bitcoin as a relic / dinosaur with no real reason for anyone to hold other than for the greater fool, that someone will step forward to pay a higher price for something that does not have any real value or any purpose anymore.
So all those proclaiming that Bitcoin will replace the likes of the US dollar do not have a clue about Bitcoins block chain technology which is already obsolete. Yes they can tinker around smart contracts to place layers on top of bitcoin holdings, but there are much better blockchain alternatives to invest in.
So Bitcoin could just fade into the background much as the likes of Ford, GM and GE have, that were once stock market giants but are now just background noise, the same is more likely than not to happen to Bitcoin where the clear warning sign will be when crypto prices start to diverge, i.e. crypto's such as Ethereum rises whilst Bitcoin significantly under performs,. failing to follow the fantasy stock to flow and halving models that the bitcoin maniacs cling onto to deliver this $1.4 million per bitcoin targets.
The bottom line is there are plenty of black swans lurking in the background 5 of which I have mentioned above which means that investing in crypto's even Bitcoin the so called gold of crypto's is very high risk. Any of these coins could at best stagnate and worst go to zero, so a warning NOT to get carried away with the ALT coins and to be ultra careful of holding ANY of the so called STABLE coins! And, well only invest what you are prepared to LOSE! It is definitely NOT easy money as many will experience WHEN the likes of Tether EXPLODES!
US Trending Towards Hyperinflation
At it's core the reason why the US government has so far gotten away with printing money even to the extent that clueless politicians are proclaiming a new nirvana of perpetual money printing without consequences is all due to the fact that the US Dollar is the worlds reserve currency. However that is only because of the US economy and military being dominant where the perpetual money printing machine without inflationary consequences is due to the fact that excess dollars are being soaked up by the global economy which has a fly in it's ointment namely CHINA!
ECONOMIC AND MILITARY POWER DETERMINES RESERVE CURRENCY STATUS
We are fast approaching the point where China becomes the worlds dominant economy.
However for now the US still far out spends China in terms of military spending thus looks set to remain dominate for at least another decade or so.
Which is why I think outright military conflict which China is inevitable as I voiced in my in-depth analysis of late 2016 that a conflict will take place probably centered in the South China sea and likely see the use of nuclear weapons by the early 2030's especially as China's official statistics probably under report the true extent of chinese military spending by the emerging Chinese empire that could actually be double that reported.
In terms of crypto's the central banks probably see stable coins such as USDT as a means of printing even more money without themselves doing the printing i.e. it's not on the Feds balance sheet. And printing money is the name of the game right now, all the way to it's final destination - HYPER INFLATION. Note this is not a forecast that hyperinflation is imminent or likely in 2022 or even 2023, but that the US and UK and most others are trending towards an hyperinflation panic event as there is no free lunch to giving out stimulus checks and ever expanding deficit spending that so far has been allowed to persist due to US dollar reserve currency status that is time limited!
It's a MESS! And at the end of the day no matter what we do we are all going to lose at least some capital no matter what we put our money into to try and protect it. Which is one of the reasons why I am spending time and energy investing in crypto's, not because I think I am going to get rich on them X10 or more etc, but that if one buys and sells them without getting caught up in the hysteria that surrounds them then they could protect one from ongoing rampant central bank money printing, so another tool in ones arsenal in addition to safe AI stocks, housing and precious metals etc. But usually there are no winners during hyperinflation, it's a case of limiting the damage done, i.e. don't get left with a wheel barrow full of thousand dollar bills, or in my case a barrow full of worthless British £1000 pound notes.
SO hyperinflation is not a question of IF but rather WHEN, for which we will see signs of in high 'real' inflation and not the fake CPI statistic, upto the point panic sets in when trillions of euro dollars (nothing to do with the Euro) come home to roost, domestic and foreigners seeking to ditch the their dollars for any asset they can get hold of, all whilst the Feds money printer goes ballistic in attempts to keep monetization exploding government debt to cover deficit spend, that is your Hyperinflationary panic event that like the covid waves of 2020 just keeps getting worse over time until the purchasing power of the currency is completely destroyed.
Another inevitable consequence of the gradual loss of confidence in the Dollar is that the Fed will be forced to RAISE interest rates but more on that in a future article.
BITCOIN TREND ANALYSIS
Bitcoins price action during the first half of 2021 was a classic distribution pattern that had the smart money (you and me) SELLING out of Bitcoin and other crypto positions.
The chart shows a lower high followed by a break of the 48,000 low which resulted in a measuring move to $36k, around which Bitcoin has been gyrating as it works off an over sold state i.e. so that the scared crypto investors after the May blood bath can start to feel bullish once more, hence if you go online you are going to see a lot of chest pounding going on out there in the crypto world that each passing day proclaim that the bottom is in, Bitcoin withstood it's test and thus it's a Wyckoff to the moon! $180k by October and more!
When instead all Bitcoin has done is to gradually undo an oversold state all without having gone anywhere in price which should mean that Bitcoin is preparing for another leg lower that could be on par with the decline from $65k to $31k off of about $44k, so technically Bitcoin price could trade as low as $10k! No I don't expect $10k to be probable but it is possible, nevertheless trend analysis so far continues to suggest that significantly lower prices than $31k are more probable than not. Though the moves will be very volatile because there are a lot of technical traders out there, trading on margin and reacting to price triggering moves thus magnifying the price trends in either direction that and exchanges running stops to their own advantage.
Elliot Wave - Suggests that we have seen the first ABC of a probable 3-3-5 wave pattern. Which means the current pattern is corrective, that could even extend higher back towards the Mid $40,000. That I am sure would lull many crypto maniacs into a false sense of security before the REAL bear market begins in percentage terms i.e. the move from the high ($44k?), will likely exceed the 52% drop from $65k. Anyway gaming a 52% off 44k would suggest a target of $22k. Which I would equate as to the upper end of a bear market target for Bitcoin.
Support - In terms of where a falling Bitcoin price would gravitate towards and find support we have $29k, $23.5k, $20k, $18k, $14k, and then heavy support at $11.5k. At this time I can not imagine Bitcoin could trade lower than $11.5k, but it could, just that sitting here at $40k it seems pretty far fetched.
So in terms of trend analysis bitcoin is WEAK. The obvious target is the previous highs at 20k. and even below that we have support all the way to $14k, that should act as the key target range to accumulate Bitcoin in should such a decline materialise.
Price Pattern - Mega head and shoulders pattern (weak pattern), where a a break of the neckline would measure all the way down to $4000! But it is a weak pattern.
Bitcoin Bear markets analysis - How low could she blow?
That magic number of $14,000 is cropping up once more when taking an average of the last 4 Bitcoin bear markets, this analysis also suggests that the bear market could run into 2022.
However taking the more conservative last bear market into March 2020 would project to a bottom at around Bitcoin $18,000 during December 2021.
Bitcoin Trend Forecast
Therefore pulling all of my analysis together then my forecast conclusion is for the bear market to Bottom during December 2021, targeting a trend to below $20k and possibly spike to as low as $14k during December 2021 with the most probable trading low is likely to be $16k. Though I expect the trend will be very volatile i.e. there will be a lot of fake out rallies to the upside and as is the case today every rally off the lows will be seen by many as the end of the bear market. So the key trend forecast is for bottom during December 2021 at between $18k and $16k as illustrated by my trend forecast graph.
Bitcoin Long-term probable Next bull market price target
As you may have picked up from the above I am not buying the bitcoin to the moon thesis that many crypto manic's see as the inevitable destination of the Bitcoin price and even more for alt coins. More probable is that the Bitcoin price hits a ceiling of sorts and then stagnates, failing to keep up with newer blockchain technologies. So where could the Bitcoin price hit its cap? That is hard to say, but I would not be counting on Bitcoin hitting $1.3 million by late 2025. At a best guess, what could be reasonably achievable is for the bitcoin price to double form it's recent all time high of $64k to about $128k by the time of the next crypto bull market peak. And I am sure it will act as a wake up call for many diehard Bitcoin $1+ million proponents, as all of their models FAIL to delivery that which they had so carefully penciled in for the Bitcoin price.
a, That the bitcoin price fails to fall and thus no buy limit orders are triggered in which case it's to move on to less risky opportunities and leave the crypto gamblers and miners with their blockchain toy.
b. That the bitcoin price does fall but that $64k was THE peak and thus the best could be Bitcoin to be stuck in trading in a range of $30k to $40k for many years. This scenario would still yield a profit if upto 100% on an average buy price around 19k, which is another reason to only buy at a discount to bitcoins current trading range.
c. That bitcoins goose is already cooked, how? USDT leverage evaporates along with this scam stable coin, i.e. it could be that all of the run up over $20k was due to leverage and in fact THAT is Bitcoins ceiling price rather than $64k or $128k. In which case an average buys at below $20k would still allow one to at least break even.
d. That bitcoin is now obsolete, i.e. it's going to deviate and under perform against Blockchain 2.0 and 3.0 crypto currencies which means one should be diversified in better blockchain technologies than bitcoin.
My Crypto Bear Market Investing Strategy
1. BTC & ETH - My primary focus will be on building positions in BTC and ETH that will target approx 80% of my crypto portfolio, the balance spread between a number of Alt Coins such as Cardano and Pokadot.
2. Hold BUSD and USDC - In advance of buying crypto's I am funding my accounts (mainly Binance) with approx 50% of my target position size to as to capitalise on a high GBP exchange rate, converting into BUSD and USD whilst also correcting my initial error of holding USDT.
3. Place limit orders on approx half of the funds on account across the target crypto's in relatively nearby levels compared to the more distant levels i.e. BTC $21,500 and ETH $1400. Whilst my initial limit orders are far distant from the actual crypto prices as I am anticipating a decline in prices. However over time my orders will gravitate towards being nearer to the actual spot price i.e. over the next 6 months and where I could even be buy crypto at spot rather than with limit orders depending on what transpires over the remainder of this year due to various dynamics such as the Ravencoin halving due in Jan 2022 etc in advance of which I want to have a significant holding of raven coins.
4. INTEREST - With the remaining 50% of USDC and BUSD placed in short-term 7 day fixed deposits that earn 5.31% (APR) with Binance, re-evaluating every 7 days whether to continue fixing or place more limit orders with i.e. as crypto's begin to sell off.
5. Account Funding - As the limit orders are triggered I will then look to fund my accounts with more fiat.
At the moment my focus is on using Binance, however I hope to eventually be able to fund Coinbase so as to spread the risk between exchanges, else it is likely Binance will remain the primary means of building my crypto portfolio.
Crypto 1 - Ethereum (ETH) $2600
Ethereum will be my largest holding at 41.6% of my crypto portfolio. Why such a large holding of Ethereum? We'll because it is by far the most liquid and active in terms of developments, with so many layers it's mind boggling, that I can't see how any of the newer competitor crypto's can ever catch upto, especially given the eventual move to ETH 2.0 sometime during 2022. Therefore it is highly probable that ETH will replace Bitcoin as the dominant cryptocurrency.
The following chart shows all of my buying levels for ETH that range from a high of $2080 all the way down to $560, which is set against the current price of $2600. The chart also shows the area where I will be seeking to place most of my limit orders to buy at between $1400 and $600 i.e. I anticipate about 90% of my limit orders will be in this price range.
Crypto 2 - Bitcoin $40,375
My bitcoin buying levels range from $29,000 all the way down to $12,000 for an anticipated allocation of 37.8% of my crypto portfolio. I will be placing 90% of my bitcoin limit orders in the range $20,500 to $14,000, with remaining 10% at between $22,000 and $20,500.. So if Bitcoin fails to fall to at least $20,500 then my exposure to bitcoin is going to very light and thus left to mostly accumulate via that which I mine via GPU's.
Crypto 3 - Ravencoin $0.078
Raven halving takes place in January so I aim to have 4.4% invested in this crypto by then that has already fallen hard when compared to the likes of Bitcoin and Ethereum and so I have already bought a small amount of Ravencoin. Whilst I expect to place 80% of my limits at between $0.02 and $0.035.
Crypto 4 - Cardano $1.59
Cardano (ADA) is a third gen blockchain, a competitor and backup to Ethereum that is a 2nd gen blockchain. Cardano looks set to create it's own ETHesk ecosystem and currently has obvious advantages in terms of gas fees i.e. about 16 cents per transaction. Therefore I will be looking to invest 3.5% in ADA. I aim to place 90% of my limit orders between $0.46 and $0.17.
Crypto 5 - Pokadot $25
Pokadot / DOT about to be listed on Coinbase Pro so a coming of age alt coin, another Ethesk eco system such as Cardano. Price rise from $7 at the start of the year to a high of $50, currently trading down 50% at $25. I aim to invest 3.3% in DOT, with 90% of limit orders in the range of $8 to $4.
Crypto 6 - ChainLink $26
An ERC20 token that attempts to bridge the gap between the blockchain and the rest off the world. Proponents of Chainlink expect the crypto to literally skyrocket to the moon with daft targets of $1000. The crypto peaked at $52 and has fallen by about 50% to currently trade at $26. I am aiming to invest 3.1% in a price range of between $4 and $10 for about 90% of holdings.
The breakdown of the remainder of my target crypto holdings are -
- Lite coin $178 - 2.4% - at sub $84
- Nucypher $0.31 - 1.7% - at sub $0.19
- Stellar Lumens $0.34 - 1.1% - at sub $0.25
- GRT $0.71 - 1% - at sub $0.45
Creating The Perfect Crypto
Wondering about the perfect crypto that I would embrace has got me thinking about considering creating my own crypto coin, probably as a BEP20 or ERC20 token, with key difference against the likes of Bitcoin and Ethereum being a mechanism to add intrinsic value to the crypto, and that store of value will not be depreciating fiat currency but say the Top 5 or 6 AI stocks in my portfolio. This would effectively create a crypto with all of the upside and little of the downside risk as the coin would have intrinsic value and thus a floor that would rise with the stock price of the AI stocks. In fact it is possible that at times when other crypto's are under going a blood bath that this crypto could continue to trade towards new highs.
It costs roughly $5k to create a crypto coin, though adding intrinsic value would multiply that cost several fold and then how to maintain value as the market cap of the coin increases. A project to work on in the background, but such a crypto would offer the best short, medium and long-term store of value and be far less volatile than any of the other crypto's.
How to Invest in Crypto Without Getting SCAMMED
Firstly there are a lot of crypto exchanges out there most of which CANNOT BE TRUSTED with any significant amount if holdings where basically the smaller the exchange the greater the risk of your holdings being stolen either through phony hacks i.e. the exchange says boo hoo we were hacked and x% of your holdings have gone OR the exchange out and out runs off with your crypto, disappears into cyber space for ever and it happens a LOT! For instance it happened only a few weeks ago, Theodex a crypto exchange based in Turkey disappeared with $2.2 billion over night. Where the scam was centered on dog shit coin called DOGE, selling DOGECOIN at well BELOW market value as the following illustrates where Theodex was selling Doge at $20 cents when the market price across other exchanges for the poop coin was 27cents thus sucking in a huge amount of volume of trading, the final victims of Theodex's scam operation.
As is is the case with most scams the operation was underway for well over a year before the scam exchange disappeared.
And there are many more crypto coin and crypto exchange scams out here. So the message is clear pick your exchanges carefully, don't get seduced into any of the freebie and special discount offers that the smaller exchanges come out with to entice unsuspecting victims with because it is JUST NOT WORTH THE RISK!
So it should be much safer to have holdings at the largest exchanges hence why I had high hopes for Coinbase, unfortunately it is a poor trading platform and it's charges are VERY HIGH, so the bulk of my crypto will not be bought through Coinbase but rather Binance, yes it is higher risk than Coinbase, so the strategy will be to buy with Binance and then probably seek to move the bulk off Binance into a hard wallet, probably just most of my Bitcoin and Ethereum holdings only.
CHIA SCAM COIN
A sure fire red flag for a SCAM COIN is when a huge number of coins have been PRE-MINED held by the insiders who released the crypto onto the unsuspecting gullible mining public, case in point being CHIA as I covered in my following video of why it is a SCAM for ordinary folks designed to profit from a potential $100 billion IPO.
Binance vs Coinbase
Coinbase is designed to extract as much fees from customers as possible i.e. despite jumping through several hoops to get verified the only way to deposit funds onto Coinbase is by buying BTC which incurs a 3.8% FEE! And then to transfer to a stable coin such as USDC in preparations for placing limit orders I would incur another 0.5% fee, and then another 0.5% fee for when the limits are triggered. This results in a 4.8% fee incurred to achieve my objective of buying crypto via limit orders!
Compare this to Binance that charges NO deposit fee if done via a bacs transfer and where the fee charged is 0.1%. Thus again depositing sterling and convert to BUSD, place limit orders, when triggered the total fee will be 0.2%, less than 1/20th that of Coinbase!
For example Bitcoin is trading at $36,000. The effective bid offer spread allowing for the transaction fees to deposit into BTC with Coinbase results in an equivalent buying price 37368, and 35820 to sell. Whilst for Binance it is 36,038 to buy and 35,964 to sell. So you can well understand that my starting deposits have gone to Binance and that is before we cover the quality of the trading platforms. Coinbase's standard platform is garbage, Coinbase Pro is an improvement but limited in functionality, Binance on the other hand is what I would consider over kill for what's needed to invest in Crypto's i.e. MARGIN, FUTURES, OPTIONS, even something called P2P, and much, much more. Be under no illusion, if you invest in crypto with margin then you will be magnifying your risk in already an high risk market with a high probability of losing all of your money invested on margin. No matter how clever you think you are margin investing WILL come back to BITE YOU!
For a better understanding of the two platforms I posted a video of my experience of using Coinbase and Binance and why Binance is the clear winner, if only it were regulated! So users of Binance should steer clear of the risky trading instruments by sticking to investing without margin. For instance imagine if one bought Bitcoin at say $20k, and then see it spike down to $14k, and where if one is unable to meet the margin call ones positions will automatically be closed and any other assets sold to repay the margin loan which of course also incurs a financing fee and interest. So do not even contemplate investing on margin. Same goes for Options, steer clear, crypto's are high risk enough without X10'ng your risk!
And here's how to make the Binance low transactions fees even lower. Signup to Binance with this discount code Z728VLZ and you get 10% OFF your trading fees.
Also note that my conclusions are based on my experience as a Brit, and it appears that the US version of Binance is less robust with fewer options and higher fees, so a case of do your own research to find that which works best where you reside. Where for me in the UK Coinbase sucks and the clear winner is Binance.
Have ARK Invest Funds Bottomed?
Have Cathy Woods managed ARK funds such as ARKK hit bottomed? Given that a quick youtube search suggests many think so.
Well Where does ARKK stand in comparison to it's largest stock pump holding TESLA
(Charts courtesy of stockcharts.com)
That's a mighty strong correlation between the performance of ARKK and Tesla.
What do I expect Tesla to do given it's barmy over valuation as I iterated in my early May analysis?
Tesla stock is heading lower, a quick analysis suggests the stock could easily trade to under $400 during 2021, that's more than a 60% drop off its $900 high, a Tesla stock BEAR MARKET that the likes of Cathy Wood are desperate to avoid materialising, though if she really is intelligent then whilst she has been busy pumping Tesla in the media she will have also been busy selling Tesla stock at the same time.
In fact in my subsequent article I revised my expectations for Tesla lower to trade to under $300 a share, less than half where it is trading right now. So then how can ARKK have bottomed if their biggest holding looks likely to HALVE in price? And Tesla is representative of the type of stocks ARKK is invested in so even if ARKK has been some selling of their Tesla holdings, most of the rest of ARKK portfolio is of similar quality.
It appears ARKK funds are trending to a similar final destination as Tesla, therefore it is possible that we could see ARKK trade all the way down to about $60, which is near half it's last close of $113!
I am sure if it happens ARKK's Cathy Wood will pump loads of spin into how great a buying opportunity it is that stocks have fallen so much just as she was seen stating about a week ago that she had expected the drop all along because her just out of University motley crew of pocket geniuses with no real world experience told her so in tweet or whatsapp message that self destructed months ago or maybe it was in a dream via prototype neural link, anyway ARKK at $60 is all good as it's going to X3 from there. In which case lets hope Tesla does not halve in price once more to tale ARKK down to the low 40's! But with Cathy it's always a case of blue sky's overhead no matter that most who have invested in ARKK will done so at over $100 per share as indicated by the volume.
This is the problem with funds and fund managers, all one is doing is paying for a perma sales pitch of blue sky's ahead. It is infinitely better to invest in a few good safe stocks and then forget about them, that is how one actually INVESTs, not like these ARKK clowns trading in and out, in and out, in and out to fund value oblivion.
My analysis schedule includes:
- More X10 Biotech Tech Stocks - 50% done
- UK House Prices Trend Analysis - 15% done
- How to Get Rich! - 70% done
- US Dollar and British Pound analysis
- Gold and SIlver Price Analysis
Your analyst locked and loaded to buy crypto's should the forecast price falls materialise.
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