The Bitcoin Blackhole – Cryptozoa

If you’ve been following Bitcoin at all, you know that it hit it’s low around December 16, 2019 at $3,264.08. Currently stalled around the psychological barrier of $10,000, with Bears selling every time it crests $10k, and Bulls buying every time it drops below it.

Where’s Bitcoin going? Might be time to take a step back.

Beyond simple technical analysis, let’s take a macro level look at what is happening in our economy.

Whether or not you agree with Trumps tax cuts the fact remain that it ballooned the US debt into the trillions. If this continues this can eventually lead to a credit crisis, with money printing in order to satisfy debt obligations, which then further devalue the US dollar.

It’s a cycle that can lead to disastrous results.

On top of that Trump is urging a 1% rate cut to the Fed, along with more Quantitative Easing (QE).

On top of the Big Debt load, add QE, aka “Helicopter Money,” and the inflation band wagon starts rolling downhill. If this gets out of control (aka hyperinflation), then this would affect how creditors who own US debt view the ability of the US to pay its debt, aka its credit rating.Venezuela all over again!

Flood the market with cheap dollars, and despite the proclamations of the Fed, if you take a look at house prices in Denver, cost of college, the skyrocketing price of insulin and healthcare in general – tell me we only have 2% inflation.

Bullshit.

The effect of this is inflation. Let’s look at an example such as a house. It’s not that houses magically got twice as good in 10 years, they only got twice as expensive, all the while remaining essentially the same.

The worth of the US Dollar became less (worthless?), needing more to buy less and less.

If you value a currency that has a programmatically fixed amount (21M Bitcoin) against the measure of a constantly inflating one (USD), what do you think will happen? It will take more of the inflating one to equal in value in comparison to the harder one.

Such as Venezuelan dollars to the US Dollar…or the US Dollar to Bitcoin. Currently it takes 248,567 Venezuelan bolivars (VEF) to equal 1 United States dollar (USD).

Now, let’s conduct this test versus bitcoin: 10,000 USD to 1 Bitcoin (BTC). Can you spot which one is the inflated currency?

Compare a currency that is the hardest money, and mathematically less of, matched with a demand that just seems to go up and up, against the softer, fluffier, inflated USD and what do you get?

An investment outcome with unlimited upside, and very little downside.

When every hedge fund and pension fund on the planet starts to diversify 2–3% of their trillions of assets into the non-correlated asset of crypto, what do you think will be the eventual Bitcoin price?

When the big boy financials such as the BAAKT, Fidelity and JP Morgan’s dip their toes into the crypto waters in order to get a taste of an asset class that is non-correlated with their other holdings, do you think the price will rise or fall?

What will happen when the more than 36 million millionaires finally get it together and each order a single bitcoin, of which there are only 21 million to ever exist, with many already lost or stolen? What will be the eventual price of a single Bitcoin?

When Central Banks such as the Fed start buying bitcoin in order to stave off the Bitcoin buying of the Chinese, Russian, Japanese, and Indian governments, what do you think the price will be?

No one wants to be the last one in the door as far as buying into the hardest of hard moneys. Gold used to be the de facto hard hard money…until Bitcoin came along. 2019 saw a 68% spike in Gold buying through Central Banks — why do you think that might be? Here’s an interesting sentence:

Leading the way for gold purchases by central banks in 2018 was Russia’s central bank, which bought 274.3 metric tons to reduce reliance on the U.S. dollar — USMoneyReserve.com (emphasis mine).

That works out to $17.63 Billion US.

And what asset is more precious than gold? Mathematically limited, and even dwindling away?

What happens when China, the biggest buyer of US debt, decides against buying more US Debt, and even sells some of what it already has? Well, they already have.

If China, the buyer of last resort for US Debt, decides not to buy, and then the US can’t meet its obligations, what do you think the eventual value of the dollar will be?

The US has enjoyed years of prosperity much of which is attributable to its status as the World Reserve Currency, used for governmental purchases for Oil. But that status is being challenged, with hostile countries looking for alternatives. Even JP Morgan admits that the US Dollar may lose its status as the World Reserve currency.

“We believe the dollar could lose its status as the world’s dominant currency (which could see it depreciate over the medium term).” ~ CCN, JP Morgan Admits Dollar’s Doomed Reserve Status to Unwittingly Cheer Bitcoin

What alternatives exist? Russia is using gold for now. And what is harder than gold? More limited? The rarest of the rare?

You could have bought 5,000 Bitcoin in 2009 for about $26.60 US. Now, with Bitcoin hovering around $10k, you would have turned that $26 into $50 Million dollars. That’s a 192,307,592% increase.

Bitcoin in 6 years has done what took Warren buffet 40 years to do. When you take the entire price history of Bitcoin, it has gone up a whopping 720,000,000%!

I’ve heard Bitcoin described as a Ponzi scheme, a currency used for drug buying, prostitution and human trafficking.

Ignore all that. You could use all the same terms for the US dollar.

Every day the dollar becomes weaker, and every time you hand it to someone else they’ve just received less money the moment you turn away.

Bitcoin is not the same.

Bitcoin, despite the parabolic rise to $20k, then precipitous fall to $3200 is still the hardest of all hard money. Don’t confuse volatility with ROI. Volatility is just the result of being a tiny asset class.

Forget the moping that you didn’t get in at 2009 when Bitcoin was created. If you got in on January 2017 at around $1,000, and just waited a couple years your $1,000 would magically become $10,000 today (July 25, 2019).

Booms(and Busts) in the Bitcoin price have occurred many times in the past. Let’s say you bought in April of 2013 at $260. You would have had to stomach a fall to $45 in the space of 2 days — an 83% decline. Much worse than the rise and fall of the end of 2017. But, if you held till today that would be a 3,746% return, turning $1,000 invested into $37,000.

I’ve heard Bitcoin described as the apex predator of currencies. Every time you hear that Bitcoin is dead it manages to rise again, stronger than before. Its properties of being Decentralized, and limited to only 21 million, mean that the entire world is participating in the purchase of the rarest of rare assets. The Capital Flows of Dollars, Yuan, Rubles, Renminbi and Pesos have been driven mainly from retail purchasers.

But now come the Big Boys. The Fidelity’s, the BAAKT’s, the JP Morgan’s, the Pension and Sovereign Wealth funds. All champing at the bit for a green light from the SEC, all jostling to be the first to be the custodian of choice for the ocean of money waiting at the gates.

Fidelity by itself has over 7 trillion in customer assets. If just 2% of their customer assets get diversified into BTC, that’s $140 billion, which is the equivalent of 80% of the entire existing bitcoin market ($170B).

Bitcoin rose to $20 million based on the retail FOMO at the time. What happens when the Big Boy financials start to foam at the mouth, wanting to get the cheap BTC at $10k, $15k — or whatever?

What happens when the Wall of Worry rises from currency devaluations, gold buying, and the US dollar failure as the World Reserve Currency?

Bitcoin then becomes, not just the baddest of bad predators; it transforms into a blackhole of capital flows from not just financial corporations and funds, but of nation states.