Fri. Dec 4th, 2020
bitcoin

Bitcoin is a canary in the coal mine. When it jumps or dumps you can almost be certain the reason will pop up in the news in a few days time.Bitcoin is hopping and as such I’m looking at gold and sweating because Bitcoin has a habit of leading the bigger heavier haven assets like gold by a day or two and I love gold right now, but I am out of it because a crash in the stock market will pull gold shares down with it in the short term and that is what I feel is highly likely to happen between now and February 2021. “‘Now”’ also seems to be more likely than “‘later”’ for this dump to kick off, so I’m out of any assets that will get hit by a run on collateral but wary of trying to time gold’s next rally.

bitcoin

I am not out of crypto, which could also get wacked by a stock market crash, but its volatility is so immense I’m not risking mistiming the dip and bounce so have hung onto my crypto positions in a classic hold/buy and hold manner.So it is nice to see bitcoin breaking upwards. It is breaking out toward $14,000 and that could just be part of a noisy long-term trend to the moon that will grind on for years but it could also be a “catalyst” event somewhere in the system about to break the surface.

Without doubt geopolitical insider trading happens a lot and it happens in bitcoin. Bitcoin is such a small market and so accessible and is more opaque than other instruments that when things get spicy in geopolitics, it pops early.

It is popping. Here is the chart:

bitcoin chart

The trend is strong and it should be. There are now half the coins being produced that there was early on in the year, so the “‘halvening”’ of new Bitcoin issuance means there is half the downward pressure on the price that the new coin production creates. With the same buying activity, the issuance drop in new Bitcoin money supply should drive the price much higher than before. Then there is the long plodding journey into the mainstream that sees Bitcoin every day marching towards the mass market another powerful but incremental push upwards in value.

But spikes are often created by events and Bitcoin is a telegraph of upcoming news because the first to know something is ‘up,’ run for Bitcoin because they can do so with more speed, flexibility and security than with most other financial instruments, without disrupting their normal positioning. Bitcoin is like a float on the end of a fishing line, it twitches early as the fish start nibbling on haven assets.

I will not be surprised if gold starts to rally shortly and if it does I’ll have to consider reloading up on gold stocks, because gold will go on a run in the next six months. Timing, however, is fiendishly difficult but I will be looking to Bitcoin to try and divine when and if gold will follow Bitcoin and break to the upside.

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