Before Bitcoin can get back to a bull market the global macro environment needs time to shake out. How long, we don’t know. We will get in to this at the end of the blog, but the charts tell us Bitcoin is warming up. However, it could still take a few months or so to actually happen. It appears this time is very much needed.
We will go back to George Gammon again. For Global Macro. Below, in this chart he shows the Federal Reserve losses of $13 billion, in earnings remittances due to the US Treasury:
These loses are caused by quantitative tightening, and rate hikes all of 2022. This causes the assets the Fed has to buy, to get more expensive. Over time, the cost of debt service meets or exceeds the Federal Income, into the Federal Reserve. Then the Fed is insolvent and has to borrow from the US Treasury. This day is fast approaching! Then, the Fed has an accounting gimmick to make the books look better. The loss is a deferred asset. If they defer the more expensive asset on the balance sheet, the loss is hidden:
Then they record an IOU for future profits, which are higher than the current loss. They actually get recorded by the Fed as profit, not a loss, because they look at future profits and hide current losses. Cooking the books to make the Federal Reserve books look much more solvent than they are:
If quantitative tightening continues over time, the deferred asset loss will grow as these Treasury Bonds the Fed has to buy, are more and more expensive, as rates go up. That is how George got to as high as $100 billion in deferred asset losses, below:
This chart shows it even better, thanks to Charlie Bilello:
If the Fed has to borrow from the US Treasury. Printing will be the only answer. Ultimately the Fed will have to print money to solve this financiall recession that is coming! First, the QT has to work, and so far it has not been high enough, to offset the losses, the Fed has been racking up in 2022 (rate hikes all year). We see a pivot, and more money printing to offset the losses over the long run.
Now for the charts. The green buy signal dot is about to print on this chart below. However, this can take 1 or 2 months before the buy signal dot forms on the chart:
Will Global Macro be much different by February through April 2023? Time will tell. Let’s see if the green buy signal dot appears by the end of the year. This could extend, but eventually, Bitcoin price action will rise up in a more earnest way, than what this week has presented so far. Bitcoin is strengthening, Binance is looking shaky and that could be the kind of black swan event that could push out a price recovery. Eventually, this will play itself out. We are not financial advisors and this is not financial advise. Let the Binance liquidity situation play itself out. That is a huge black swan that would impact Bitcoin and all Crypto Currencies. Over time it will resolve, and Bitcoin will be left with fewer altcoins to steal investment dollars from Bitcoin. An altcoin culling period is not a bad thing, long term. We see potential for short term pain, and a recovery next year, in the first half. Stay patient and humble, Bitcoin is gearing up. It could take a few more months before these issues are cleared out of the way.
Neutral ATM is here to get everyone off of zero Bitcoin.