This has been a fast paced start to the year! Why? We have been racking our brains trying to figure out how or when the volatility will come back into Bitcoin and Crypto. Let’s start with this very good coin telegraph article about the bearish sentiment waning, click here to read more.
Bearish sentiment most probably began in November after the $69K ATH because institutional investors began shorting and manipulating the crypto market, thanks to the Future’s ETF’s. They call that an efficient market. Longs and shorts are leveraged in the futures market because the only SEC approved ETF’s were for Future’s ETF’s. There will eventually be a Spot ETF approved, and there are law suits going on about that now. Using derivatives to push down Bitcoin only works for so long. See this chart below. In 2021, all year 10 year Bonds coorelated to Bitcoin. Now a MAJOR divergence shows up in the chart, since January:
This coorelation could, at some point, correct or adjust meaning a major run for the Bitcoin price! That begs the question, how?
Let’s start with this news. More adoption from smaller banks. They are going live with mobile banking Bitcoin trading apps. More access to spot Bitcoin from smaller retail investors, click here to read more.
Then we can add that the FOMC meeting next week will create bullish news for Bitcoin. Whereby last week, we had 7% CPI inflation printed. Next week, expect more hawkish news from the Fed. Notice in this chart the Nasdaq is pricing in hawkish FOMC news about raising rates to control inflation. Yet Bitcoin pumped some on that news. The more hawkish the Fed is, watch stock markets react negatively:
This will push Bitcoin to break any S&P500 coorelation and diverge. Look at the chart again (2 charts above), about the 10 yr Bond and Bitcoin diverging since January. While they cooresponded all of 2021. Look at open interest which did not go down after Bitcoin dumped 42% since November. Shorts may need liquidating. That would be the institutional trading on derivatives, pushing down Bitcoin. It cannot last. Something has to give here, eventually! Look at this quote from Rick Rieder, CIO of Blackrock:
If stocks respond quickly to rate hikes, which we think they will. What then? What will they do?
Here is Roy Niederhoffer of Niederhoffer Capital:
“Inflation is so powerful that the Fed can’t do anything about it. 3% to 4% rates will crash the economy. Government can’t fund itself at that level.”
Below is the entire interview with Kitco, click here to view on twitter.
Bitcoin and Ethereum, he says, are both poised to advance as an inflation hedge and an NFT, Metaverse technology hedge, respectively. We see Bitcoin as the endowment, Ethereum as the speculation. Thus, the endowment and the speculation is banking on the government being forced, at some point, to print money to fund the government, and inflate their debts. This could begin in earnest over the next year or two. Inflation, once coined as “transitory”, has proven itself to be anything but. If Roy Niederhoffer is right, and we think he is. The Fed will be back to higher QE and money printing in the not to distant future. That spells massive gains for Bitcoin. We just have to wait it out. If the chart about the 10 yr bond needing to find it’s 2021 coorelation to Bitcoin, in early 2022 holds true. The wait could be shorter than many think. We still see bullish market behavior for Bitcoin, we just don’t know when. Volatility is waiting in the wings. When it shows up, things will change very quickly! With all of these institutional investors buying up Bitcoin since 2020. The efficient market we have now is efficient because it does not rely as much on retail investors. The Bitcoin market is much more tied to global macro now. The global macro environment, will not allow Bitcoin to fail. Because governments have to fund themselves. That doesn’t happen without money printing and massive inflation. Don’t stop stacking Bitcoin!
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