Bitcoin is halfway through 2022 today and it is -35% year to date. That is better than the Nasdaq but obviously not a good first half of 2022! Every four years Bitcoin brings the pain (2014, 2018, 2022). Today, and on Sunday Bitcoin is up. Yet, as we expected, the rally is not holding. Emotionally, this is more disheartening than in the past because the economy is much worse now than in 2018 or 2014!
Looking at the M2 money supply chart which is now discontinued, we have another source to get the information. Money supply tripled in 24 years (1985 – 2009). Now it has tripled again in just 13 years (2009 – present). By that math M2 will triple to $66 trillion in 6.5 years (by late 2028). Rest assured, if that happens, Bitcoin will be the only life boat, safe haven asset to ride out that kind of inflation. By then, we could be seeing 50% annual inflation! See the chart below:
As inflation has soured to 8.5% CPI from 1.4% a year ago, personal savings rates are at all time lows, dating back to 2008. That was the middle of the great financial recession that cost trillions in invested assets and millions of jobs lost.
So, if we look at where the economy is right now, in Bitcoin terms. This is uncharted territory. Bitcoin was born out of the 2008 great financial recession. The first coins were mined on January 5, 2009. It was the first currency with no central authority controlling it, backed by the energy grid. Today, Bitcoin is over 70% renewable energy and uses up flare gas and waste gas to power it’s ASIC miners. This would otherwise be wasted energy. So, Bitcoin is truly helping the environment, while creating the hardest, scarcest money ever created in the history of mankind. Yet, this year is a bear market year. The reason could be multi faceted. We see Bitcoin as rhythmic, after enough time passes after the halving (May 11, 2020). Bitcoin prices begin to capitulate and eventually Bitcoin miners have to capitulate which excelerates prices dropping. We believe that is the next phase in this cycle. We have always maintained that the super cycle was NOT real. We thought Bitcoin would hit $130K to $190K in the bull cycle and it only hit $69K! Yes, this is unfortunate. We believe the main reason why is manipulation caused by the SEC approveing a Future’s ETF but not approving a Spot ETF for Bitcoin. Now there is a lawsuit from Grayscale Bitcoin Trust to get this approval. We believe once this approval goes through, Bitcoin could really run up in the next cycle (2024, 2025). Here is proof in the charts why we are calling 2022 the bear market cycle. Yes we were a little late in that, however, many disagree that this is the bear market. This next chart shows the 3 day death cross. The shorter moving average dropping below the longer (older) moving average. Bitcoin has now come closer to the green line and not crossed it, thereby testing it as resistance. Here is the chart below:
These charts speak the truth. Below is a chart showing the history of the Bitcoin price touching the 200 day moving average, currently at $22K:
Thanks to Steve Courtney for this chart above.
In this next chart we can see the wicks below the 200 day moving average. It happened twice in 2015, and once in March 2020. We see this happening later this summer. A wick to $14K maybe $15K. Who knows how long it will stay down there. That will be the generational buying opportunity. Buying when Bitcoin is cheaper than at anytime in a 2.5 or 3 year window of time, is a generational buying opportunity. The most money is made in Bitcoin bear markets! See the chart below: