Thoughts on the current environment
These are my comments from some conversations I had and I hope you like it :)
It is a weird environment overall, as the market is pretty cheap, the derivatives markets are fairly well balance, on chain data & stablecoins paint a bullish picture for crypto... but in terms of TA and the overall psychology of the market, getting to anywhere between 20-28k & 1300-1700 at some point in 2022 is quite likely. I just have no idea when.
In late Jan around 37.5k and 2600 I turned bullish in the short term as the market showed strength, it was very cheap and sentiment was really bearish. We are at a fairly similar situation now, only that we did have the pump up to 46k. To me that was always the key point we'd have to retest and as that was hit, the next one is 24k. The same way we perfectly filled the 32-33k CME gap and bottomed, we are going for that one too. In the short term however I see similar dynamics as people are scared, the market is cheap and we are bouncing at support. The price action of both crypto and stocks is telling me that yesterday's bottom was at 'do or die' level which means we've either bottomed now or if we go below that we'd go much lower. Who knows, maybe it's just temporary relief and we could go up by another 3-7% before reversing lower.
In terms of the macro picture I think it is very unclear but also pretty clear. The global economy is turning into shit and tensions are rising. People aren't happy, be that inflation or mandates. To me unfortunately we will soon be reliving the period of 194x. Same way 1929 =2008, 1936-1938 = 2020-2022. Poor financial conditions have lead to the rise of authoritarianism, with governments scrambling to gain as much power, while people lose faith in them. There is too much debt and everyone is in a whole that is very hard to get out of. People are losing their minds and tensions then start to manifest internally and externally. Unfortunately history repeats itself and that's what we as traders/investors are doing, we need to learn from it as human beings are the same now as they were 10, 100, 1000, 10000 years ago. Nothing new under the sun.
Like Su Zhu said in a tweet the other day twitter.com/zhusu/status/1492324246898372608 . This is one of the best tweets I've ever read and I truly mean it. So if that's the period we are in, what do we do? What could come next?
Bond yields will go down in one way or another, while inflation stays high. For now we are at a point that bond yields are rising and have some room, until they come crashing down. The Fed will be forced to cut and to support the government. The Gov + Fed will have to do a lot of printing that will be met with very little resistance by the public. We'll be united against a common threat. And to be honest this is usually the only way out of this debt hole. Unfortunately a war and insane amount of currency debasement is the only politically viable way to reduce debt and do a reset. I hate the people who want to push for the 'great reset', but a reset is coming. It's a natural cycle, these always happen and they are usually not nice. But it's like the phoenix rising from its ashes. A rebirth.
Now when I say bond yields will have to go down, I think it will be a combination of the Fed trying to keep them low, but also people chasing the safest and most liquid instruments. Most people in such a period won't want to take risks. Low bond yields = not many opportunities anyways. So then we have high inflation + no opportunities + disruptions + tensions + less freedom and so on. So of course we are in the right market. If the physical world is suffering and there could be wars here and there (I have no idea at what scale), then the digital one should be booming. With sanctions and accounts getting frozen, while governments do insane amounts of QE, this is the place to be. Make no mistake, they will come after us to some extend at some point, but as long as we try to preserve some privacy and keep our coins/tokens in our wallets, we might be safe and able to go to locations that we can protect our wealth. Now the issue is, how do we get there? How do interest rates go down again and the bull market resume? Well to be honest I currently feel like we are somewhere in Q4 2019 - Q1 2020 or Q3-Q4 2018. We are close to having a last major leg down, before a major leg up. One catalyst (rate hikes, higher inflation, war), I don't know what... that will lead to the final shakeout which will trigger a huge monetary & fiscal response. This fractal I've mentioned on my previous ideas is what I still expect. twitter.com/BitcoinMacro21/status/1480657448214142979
This is great, but I completely disagree with one part: 'it is unwise to assume that Central banks will respond with more stimulus if inflation is rising'. At the current environment I am a disinflationist, but at the end of the day I know they will have to print. In the past it was banks that printed, but since 2008 banks aren't creating much money... The worse things get, they more risk averse they become. Now we are in a situation that is nowhere near like 1987, but more like 1940s and it something Lyn Alden has been talking about for quite some time. There are big differences from then to now of course, but the setup in terms of Governments - Central Banks - Banks is very similar.
What people need to understand is that we are getting inflation mostly not because because of issues on the supply side, not so much by Fed & Gov actions. These issues could become worse, in an environment where banks aren't lending, there is too much debt, too much uncertainty, overvalued stock markets, ESG mandates and so on. The yield curve flattening so much is a sign that the Fed might not even be able to raise rates more than a couple of times, and that in 2023 they might be forced to cut.
Think of it like this... Prices are going up and people aren't making enough money to keep up with inflation. The way things are going they won't be making much, so they need someone to give them money. Who are they going to ask for that money? The government. If prices are going up, they will demand more, something that could create an inflationary spiral. Except if, maybe, by creating a CBDC to control everything they will be able to control inflation. They want full control of the banking system and where people spend their money. For example if there is a shortage of milk, they might be like OK with your account you can only buy 1 litre / week. The majority of people think that vaccine passports are about reducing the spread and that them being used as a gateway for a CBDC is a conspiracy theory. Well in my country they already created an app called government wallet that can contain your ID + vaccine certificate. Wouldn't it be nice connect your bank cards + accounts in there and route all transactions through the government directly? It's been extremely clear that that's the goal. It is their belief, and it is possible, that by having total control over the monetary system they will control inflation.
But at this stage, they will be forced to do something. Let's no forget they always printed/borrowed for wars. And let's no forget that in the case of a war, they won't care about inflation. They will shut down the debate about inflation as they have a bigger goal. Markets crashing + Russia going for Ukraine & China for Taiwan, and they will be nah, we'll raise interest rates. Let's not forget that they can't let markets crash completely. The eurodollar & US bond markets are screaming loud and clear : you raise rates a few times at best and then you go back to cutting. So if they have to save markets again and can't fight inflation, then it's time for Universal Basic Income as this is the last time they will only save markets and not ordinary folks. At the end of the day, the situation with passive investing and the whole structure of the system in general has gone too far. They can't do anything to fix it, and they most certainly aren't capable of fixing it. Replacing the old system with a new one won't be easy and there will many shocks along the way, but I have no doubt that crypto and commodities are the best place to be in this environment. End of rand😝
It is a weird environment overall, as the market is pretty cheap, the derivatives markets are fairly well balance, on chain data & stablecoins paint a bullish picture for crypto... but in terms of TA and the overall psychology of the market, getting to anywhere between 20-28k & 1300-1700 at some point in 2022 is quite likely. I just have no idea when.
In late Jan around 37.5k and 2600 I turned bullish in the short term as the market showed strength, it was very cheap and sentiment was really bearish. We are at a fairly similar situation now, only that we did have the pump up to 46k. To me that was always the key point we'd have to retest and as that was hit, the next one is 24k. The same way we perfectly filled the 32-33k CME gap and bottomed, we are going for that one too. In the short term however I see similar dynamics as people are scared, the market is cheap and we are bouncing at support. The price action of both crypto and stocks is telling me that yesterday's bottom was at 'do or die' level which means we've either bottomed now or if we go below that we'd go much lower. Who knows, maybe it's just temporary relief and we could go up by another 3-7% before reversing lower.
In terms of the macro picture I think it is very unclear but also pretty clear. The global economy is turning into shit and tensions are rising. People aren't happy, be that inflation or mandates. To me unfortunately we will soon be reliving the period of 194x. Same way 1929 =2008, 1936-1938 = 2020-2022. Poor financial conditions have lead to the rise of authoritarianism, with governments scrambling to gain as much power, while people lose faith in them. There is too much debt and everyone is in a whole that is very hard to get out of. People are losing their minds and tensions then start to manifest internally and externally. Unfortunately history repeats itself and that's what we as traders/investors are doing, we need to learn from it as human beings are the same now as they were 10, 100, 1000, 10000 years ago. Nothing new under the sun.
Like Su Zhu said in a tweet the other day twitter.com/zhusu/status/1492324246898372608 . This is one of the best tweets I've ever read and I truly mean it. So if that's the period we are in, what do we do? What could come next?
Bond yields will go down in one way or another, while inflation stays high. For now we are at a point that bond yields are rising and have some room, until they come crashing down. The Fed will be forced to cut and to support the government. The Gov + Fed will have to do a lot of printing that will be met with very little resistance by the public. We'll be united against a common threat. And to be honest this is usually the only way out of this debt hole. Unfortunately a war and insane amount of currency debasement is the only politically viable way to reduce debt and do a reset. I hate the people who want to push for the 'great reset', but a reset is coming. It's a natural cycle, these always happen and they are usually not nice. But it's like the phoenix rising from its ashes. A rebirth.
Now when I say bond yields will have to go down, I think it will be a combination of the Fed trying to keep them low, but also people chasing the safest and most liquid instruments. Most people in such a period won't want to take risks. Low bond yields = not many opportunities anyways. So then we have high inflation + no opportunities + disruptions + tensions + less freedom and so on. So of course we are in the right market. If the physical world is suffering and there could be wars here and there (I have no idea at what scale), then the digital one should be booming. With sanctions and accounts getting frozen, while governments do insane amounts of QE, this is the place to be. Make no mistake, they will come after us to some extend at some point, but as long as we try to preserve some privacy and keep our coins/tokens in our wallets, we might be safe and able to go to locations that we can protect our wealth. Now the issue is, how do we get there? How do interest rates go down again and the bull market resume? Well to be honest I currently feel like we are somewhere in Q4 2019 - Q1 2020 or Q3-Q4 2018. We are close to having a last major leg down, before a major leg up. One catalyst (rate hikes, higher inflation, war), I don't know what... that will lead to the final shakeout which will trigger a huge monetary & fiscal response. This fractal I've mentioned on my previous ideas is what I still expect. twitter.com/BitcoinMacro21/status/1480657448214142979
This is great, but I completely disagree with one part: 'it is unwise to assume that Central banks will respond with more stimulus if inflation is rising'. At the current environment I am a disinflationist, but at the end of the day I know they will have to print. In the past it was banks that printed, but since 2008 banks aren't creating much money... The worse things get, they more risk averse they become. Now we are in a situation that is nowhere near like 1987, but more like 1940s and it something Lyn Alden has been talking about for quite some time. There are big differences from then to now of course, but the setup in terms of Governments - Central Banks - Banks is very similar.
What people need to understand is that we are getting inflation mostly not because because of issues on the supply side, not so much by Fed & Gov actions. These issues could become worse, in an environment where banks aren't lending, there is too much debt, too much uncertainty, overvalued stock markets, ESG mandates and so on. The yield curve flattening so much is a sign that the Fed might not even be able to raise rates more than a couple of times, and that in 2023 they might be forced to cut.
Think of it like this... Prices are going up and people aren't making enough money to keep up with inflation. The way things are going they won't be making much, so they need someone to give them money. Who are they going to ask for that money? The government. If prices are going up, they will demand more, something that could create an inflationary spiral. Except if, maybe, by creating a CBDC to control everything they will be able to control inflation. They want full control of the banking system and where people spend their money. For example if there is a shortage of milk, they might be like OK with your account you can only buy 1 litre / week. The majority of people think that vaccine passports are about reducing the spread and that them being used as a gateway for a CBDC is a conspiracy theory. Well in my country they already created an app called government wallet that can contain your ID + vaccine certificate. Wouldn't it be nice connect your bank cards + accounts in there and route all transactions through the government directly? It's been extremely clear that that's the goal. It is their belief, and it is possible, that by having total control over the monetary system they will control inflation.
But at this stage, they will be forced to do something. Let's no forget they always printed/borrowed for wars. And let's no forget that in the case of a war, they won't care about inflation. They will shut down the debate about inflation as they have a bigger goal. Markets crashing + Russia going for Ukraine & China for Taiwan, and they will be nah, we'll raise interest rates. Let's not forget that they can't let markets crash completely. The eurodollar & US bond markets are screaming loud and clear : you raise rates a few times at best and then you go back to cutting. So if they have to save markets again and can't fight inflation, then it's time for Universal Basic Income as this is the last time they will only save markets and not ordinary folks. At the end of the day, the situation with passive investing and the whole structure of the system in general has gone too far. They can't do anything to fix it, and they most certainly aren't capable of fixing it. Replacing the old system with a new one won't be easy and there will many shocks along the way, but I have no doubt that crypto and commodities are the best place to be in this environment. End of rand😝
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