We are short term BEARISH, and longterm BULLISH on Bitcoin. How did we get here? That is what we will explore today. We need to step back and look at where we really are in the economy. It is ugly! Not only that, a major War in Taiwan looms. When that starts, all bets are off what markets will do. We just sold ALL Ethereum! We are waiting to go deeper into Bitcoin when this flush out is ending. As for how we got here. This chart below explains it well.
The FFR (Fed Funds Rate) has had a tech bubble, housing bubble, and an everything bubble in 2000, 2008, and 2020. Now the FFR is climbing again. Red line in the chart below. Notice each bubble was at lower FFR rates. Notice the blue line in the chart, the Nasdaq. Everytime the Nasdaq crashes, FFR rates crash with it. Rates stay low and the Nasdaq soars! This is a fake economy. Money printing, or M2 money supply growth is fueling all of it. Here is the chart:
The Fed was hawkish and now they are having second thoughts as the Nasdaq is down -32%. The bond market is draining the equities market as equities slide. The only way to stop that, is for the Fed to reduce the FFR! This exacerbates inflation! High inflation while equities soar, created the largest wealth gap in US Economic history. Since 2000, this has been the case!
Petroleum inventories from the SPR (Strategic Petroleum Reserve) in the US. Supply shock in Petroleum, will create Gas and Diesel price increases. $10 Diesel by year end, which will create massive spikes in inflation. This is true since, all major commodities are shipped via Diesel Truck or fright train, in a vast majority of cases. As freight costs inflate, that will pass down to consumers of all pharmacueticals, food, goods and services, transportation, construction materials, and real estate, rent. Petroleum inflation causes all inflation! So, as the drilling leases are ended, construction of oil pipelines halted, tax breaks for Oil companies ended. This inflates Oil, which kicks off everything else. Below is the SPR inventory chart:
Now look at the DXY chart, which is rolling over and heading back towards 100. If QE starts back up and the FFR rate begins dropping later this summer (July / August), that will create inflation. Here is the DXY chart below:
Until this QE actually starts. We need to remember, the equities markets will keep dropping. See the chart below on the Nasdaq future forecast. If this is accurate, the Nasdaq could fall to 8,000 or below and then spring back up in the fall. Expect Bitcoin to have a similar trajectory. Here is the Nasdaq chart below predicting further crash and a fast recovery, due to QE, money printing:
This scatter chart below shows how more equities investors are moving investment over to bonds as a safehaven. Below the red line, is where bond investments are. Equities investment has moved below this red line, as this crash has worsened in 2022: