Factor in Real Inflation
Today, we want to look back at last Wednesdays blog. On Wednesday we wrote: “Bitcoin has completed printing a W in the chart, see below:
This run up may very well eclipse $33K. I am not able to foresee the run up stoping close to $30K.”
That was from 12/30. Today we have hindsight and we see that yesterday 1/03, Bitcoin hit $34,873! Then, this morning it retraced down to $28,540. Now, it is back up to $31,473. Lots of volatility. We expect a crash but what will be the top before it takes a 40% retracement? Trading View is showing a possible $38,000 top. We have seen predictions of $50,000 before a retracement. Here is Trading View’s chart:
The bottom line is no matter the top and no matter the retracement DON’T SELL YOUR BITCOIN! Buy the dip and stay the course long term! This is a long term assymetric bet that will payoff big for those who can stomach the volatility. Why do we take such a strong position?
The reason is a simple one. Real inflation has been hiden for 38 years due to the CPI. I call it “fake inflation”. Government raises, pensions, and corporate raises are all based on the CPI. If that is all an individual looks at, they think they just beat that rate to stay ahead of inflation. No. CPI says inflation is 1.7% in 2020. The calculation for Consumer Price Index (CPI) is a basket of goods with no high tech goods and services in the calculation. Bureau of labor statistics (BLM) shows an index of 100 also used in the calculation. This index is actual inflation from 1982 to 1984, back when inflation was 5% to 7%. If today’s CPI is a ratio back to 82’ to 84’, no wonder middle class Americans cannot keep up with the ever increasing cost of goods and services! This is why ALL Americans and ALL people really need Bitcoin longterm! It is the best hedge against “fake inflation” once you understand real inflation. Cash savings, stocks and bonds, cd’s, treasuries will not protect wealth from inflation. If a person is a saver, they need to save in something other than US dollars. Bitcoin has the upside to beat real inflation, not to mention “fake inflation”:
The above chart is comparing the bull runs, which always occur after Bitcoin supply is cut in half. We call them halvings. They happened in 2012, 2016, and 2020. Bull runs depicted on the chart were 2012/2013 in red, 2016/2017 in green, and the current ongoing 2020/2021 bull run in blue. So far, the 2020/2021 bull run resembles the trajectory of the 2012/2013 bull run
moreso than the last one. Why is that? It could be all the stimulus, quantitative easing (QE), and over all money supply growth. However, it could also be that money supply both M1 and M2 which were detailed in last Wednesdays blog are growing at alarming rates (43% in 2020, M1). Yet velocity of money or M1V, shrank by 50% since 1997, click here to read more.
What causes velocity of M2 money supply to shrink? Velocity simply means how often one US dollar is spent in a given period of time. Covid 19 lockdowns in 2020 were the main factor in the most recent shrinkage of velocity of money. Half of all restaurants in the more populated cities like New York City are expected to close permanently. However, the inflation increases from 1997 to 2019 are playing a role in a gradual reduction in the velocity of money. Combine this with the drastic increase in money supply, and there is your stock market run up since 2010. Money supply increases (QE), end up as bank reserves, which commercial banks lend to corporations, to buy back there own stock. This practice has created corporate zombies, out of once great companies, and has led to some layoffs and unemployment. So if less money is being spent, yet the supply of money is being increased at record shattering rates, and all that is doing is increasing stock prices. How is that affecting the average American family. 22% of all dollars in circulation were printed in 2020, it could be worse in 2021, we don’t know yet. Inflation is getting worse as the money printing increases. Eventually, the house of cards will fall. Holding Bitcoin for ones savings keeps inflation from having an impact. Bitcoin also outpaces all stock market indices. If a top in the Bitcoin price is spotted, and we are not near that point now, it is easy to transfer some of it into Ethereum, Gold, or Real Estate. You assets are still appreciating and volatility can be reduced with Gold or Real Estate. Neutral ATM will never transfer out of Bitcoin completely, just a reduction when the bear market does come. We want to keep money set aside to re-invest in Bitcoin when we see a bottom. That is 2.5 or 3 years from now. Enjoy the ride in Bitcoin for now.
Neutral ATM is here to get everyone off of zero Bitcoin.
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