I have no idea if we will have a collapse. The S&P 500 made a new all-time high this week, which is either proof of a new bull market or a sign of a double top (since the market is now back to the peak set at the start of 2022).
Gold is also stuck in a range. The chart appears to be a triple top, which isn’t good news for gold bugs, but with persistent inflation, one would think gold will break out eventually. Right?
Which brings us to the mystery that is Bicoin
It spiked in anticipation of the spot ETF approvals, but it was a “sell the news” event when the approvals were confirmed. Bitcoin has dropped out of it’s uptrend channel that started in December, and could easily test $40,000, $38,000, and perhaps even $30,000.
Is this the end for Bitcoin?
No. The price action is understandable.
In the past, institutional investors in Bitcoin in the USA had only one obvious choice: GBTC, the Greyscale Bitcoin Trust. It was a closed-end fund with high fees, trading at a 40% discount to Net Asset Value. It is now a spot ETF, trading at par, so long-term investors are selling GBTC and either cashing out or re-allocating to one of the other funds with much lower fees (GBTC is 1.5%; most of the rest are 0.4% or lower). As GBTC is liquidated, the fund liquidates the underlying Bitcoin, which drives down price.
Bond yields have also bounced higher in recent weeks, so investors on the sidelines are saying, “I’ll step aside and take the risk-free return.” Seems prudent.
So, we wait for the events of the last two weeks to “flush out” and see where it goes. I expect Bitcoin to be substantially higher by the end of the year, but it may be bumpy between now and then.
We shall see. See you next week.
The Pre-Collapse Holding Pattern
by JDH on January 20, 2024
I have no idea if we will have a collapse. The S&P 500 made a new all-time high this week, which is either proof of a new bull market or a sign of a double top (since the market is now back to the peak set at the start of 2022).
Gold is also stuck in a range. The chart appears to be a triple top, which isn’t good news for gold bugs, but with persistent inflation, one would think gold will break out eventually. Right?
Which brings us to the mystery that is Bicoin
It spiked in anticipation of the spot ETF approvals, but it was a “sell the news” event when the approvals were confirmed. Bitcoin has dropped out of it’s uptrend channel that started in December, and could easily test $40,000, $38,000, and perhaps even $30,000.
Is this the end for Bitcoin?
No. The price action is understandable.
In the past, institutional investors in Bitcoin in the USA had only one obvious choice: GBTC, the Greyscale Bitcoin Trust. It was a closed-end fund with high fees, trading at a 40% discount to Net Asset Value. It is now a spot ETF, trading at par, so long-term investors are selling GBTC and either cashing out or re-allocating to one of the other funds with much lower fees (GBTC is 1.5%; most of the rest are 0.4% or lower). As GBTC is liquidated, the fund liquidates the underlying Bitcoin, which drives down price.
Bond yields have also bounced higher in recent weeks, so investors on the sidelines are saying, “I’ll step aside and take the risk-free return.” Seems prudent.
So, we wait for the events of the last two weeks to “flush out” and see where it goes. I expect Bitcoin to be substantially higher by the end of the year, but it may be bumpy between now and then.
We shall see. See you next week.