I’ll keep this short this week because not much is happening.
Bitcoin is in a holding pattern ahead of next week’s “halving,” which may or may not be a significant short-term price driver.
Gold is up, but is still short of the all-time high in 1980 in real terms.
Which brings us to labour.
Immigration has boosted the supply of labour.
Businesses used the pandemic to become more automated and digitized. This tax season, did you take your paperwork to an in-person meeting with your accountant? No, your accountant has access to your CRA account, and they download all of your slips and auto-fill your return. Then, if necessary, you have a quick video meeting to discuss it. That’s way more efficient than it was five years ago.
There is slack in the labour markets. We’ve got lots of available labour.
So, even though the economy looks strong (there continues to be demand for stuff), the supply (labour) is growing even faster, and this divergence will lead to disinflation and lower interest rates.
Is this priced in?
I have no idea, but I’ll let you ponder it, and we can discuss again in the future.
The Anticlimactic Bitcoin Halving
by JDH on April 20, 2024
Every Bitcoin podcast for the last few months has endlessly discussed the impact of Bitcoin halving. Understandably, it’s an important event. Unlike fiat currency, Bitcoin has a limited supply, further limited every four years by the “halving.” As of yesterday, April 19, the number of new Bitcoin created (mined) daily has fallen from 900 to 450. That’s the “halving.”
The long-term impact is obvious: if there is less supply, the price will rise, all else being equal.
The last halving was on May 11, 2020, when the Bitcoin price was USD 8,475. By November 10, 2021, Bitcoin peaked at just under $69,000, for an 800% increase.
There is no guarantee that Bitcoin will increase 8X from here, but doubling over the next 18 months is reasonable. So, what has Bitcoin done leading up to the halving?
It’s gone down. Bitcoin is currently down 14% from its all-time high in March and was down almost 20% earlier in the week.
What does this mean?
Nothing.
Day-to-day fluctuations are meaningless.
The halving, as expected, was a “buy the rumour, sell the news” event, and I expect Bitcoin will be flat or down over the next week as speculators sell because Bitcoin didn’t immediately hit an all-time high.
This presents an excellent buying opportunity, and I plan to deploy cash judiciously over the next few weeks. Bitcoin could easily drop to $50,000, but it’s not going to zero, so now is the time to position yourself for the continuation of the bull market.
Or not. What do I know?
Thanks for pondering this; see you next week.