We keep telling readers to ignore, as much as possible, price action. The global macro environment is ripe for Bitcoin to succeed long term. True blue Bitcoiners must be very patient people who have a high degree of control over emotional impulses! This has not been more true than right now when Bitcoin is in the middle of a major bull run, though price action has been put to sleep since March/April, looking back in hindsight. So, today we ignore discussions of price action and focus on long term global macro. Obviously, the M2 and M1 money supply has gone off the charts literally, and is no longer even being tracked by the St. Louis Fed! That alone is unbelievable! What about the reverse repo market? How does that play in to global macro and what could that do to markets in the future? How would that effect Bitcoin?
Well, lets look at Bank liability. Is that liability on the Fed side or the Commercial Banking side? It is on the Fed. It is a collateral issue. The reverse repo market impacts bank collateral. The Fed has to reposess Treasury bills and loan money to the commercial bank in under 24 hours. Think of it as a short term loan from the Fed to the commercial bank. How do they do that? Money Market funds get T bills in exchange for higher yield accounts (money market funds) for their commercial banking customers. Banks chase yield like institutional investors do. They have to provide it to compete. As bond yields are dropping:
The Fed has to provide more and more M2 money supply to the reverse repo market to keep commercial bank liquidity up. Bank liquidity would not be dropping unless deposits were down and withdrawals were up. The reverse repo market is now up to just under $1 Trillion per Day! That is DEFLATIONARY! Yet, the more money supply or money stock goes off the charts, that is inflationary. Also true. The worse inflation gets, the more the reverse repo market has to grow. More withdrawals, less deposits. The more this deflationary event picks up momentum, the higher the risk of a deflationary crash event in stocks, and real estate. There has been a spike in reverse repo rate deposits since March.
This suggests that the Fed’s QE program has reached its limit, and the money they are putting into the market from their bond purchases is just coming right back. This is mostly because banks don’t have anyone to lend it to.
The other problem is a lack of collateral. Basically, if financial institutions don’t have any bonds or treasuries, then they can’t do repo operations and are forced to deposit the money with the Fed. This means that the QE program might have reached its limit because they bought up almost all of the available bonds.
Think 2008 banking crisis! If and when such an event does occur, how does the market react to inflation hedges like Gold and Bitcoin? We already know institutional investors, retail investors, hedge funds, banks, credit card companies have all flocked into Bitcoin. 8 Bitcoin ETF’s are before the SEC chairmen awaiting approval. Gary Gensler is a Bitcoiner, by the way. He is now the SEC chairmen. Another chart to look out for is the DXY. It tracks the USD index:
If the DXY climbs too fast while bond yields are already falling. A stock market crash is imminent! Will money flow into Gold, Silver, and Bitcoin? Well, in 2008 Gold skyrocketed. Bitcoin came out on January 5, 2009. In response to how poorly the Fed handled the 2008 great financial recession. Bitcoin is a more trusted safehaven than Gold is now, hence the flow of money already investing in Bitcoin over the last 18 months. Neutral ATM sees Bitcoin as the source of the next major flight to safety. Gold and Silver will also benefit, but nothing like Bitcoin! Here is something else to consider about Bitcoin:
Lightening Network total capacity is 1,726 BTC. The Lightening Network can send Bitcoin from the US to anywhere in the world in seconds. (strike.acing.co). However, in 70 days El Salvador will airdrop $30 of Bitcoin to every citizen, which is an additional 5,850 Bitcoin in Lightening Network capacity!
Additionally, Bitcoin rewards will be offered by Blockfi and in the near future, Gemini will likely get involved, with Crypto Credit Cards offering Bitcoin rewards. All of this will increase Bitcoin adoption, not to mention, increase the Lightening Network capacity. It will take a long time to mature, but this will increase Bitcoin adoption.
Then you throw in nationstates and what they are doing. El Salvador already voted Bitcoin as legal tender. Mexico’s third wealthiest man Ricardo Salinas Pliego calls Bitcoin far superior to Gold as a store of value. However, the central bank has disallowed him to make the push for a vote to legal tender status at this point. Here are the other countries involved:
In the end, 1% of the world has adopted Bitcoin, similar to 1% of the world had adopted the internet in 1996. Now 60% of the world has adopted the internet. Where will Bitcoin be in 25 years? Neutral ATM sees the answer in the multi millions per coin. Just don’t expect it to be in a straight line. Embrace the volatility. This will be a wild ride!
Neutral ATM buys and sells Bitcoin as little as $20 at a time! You do NOT have to buy an entire Bitcoin. Neutral ATM is here to get everyone off of zero Bitcoin.
Give Neutral ATM a try. We have low rates, convenient locations and we are expanding. Contact Neutral ATM, we will answer all your questions about Bitcoin and using our ATM machines. Find a Neutral ATM Bitcoin machine location near you.