Is Bitcoin defying the laws of gravity? YES
Bitcoin is no doubt getting dressed up for it's CME options-trading commencement launch. The market makers introducing Bitcoin to the public for options trading are dressing it pretty. But get this, that's only 1 variable tailwind that's causing this surge. Today Bitcoin is breaking out to a new all time high now a feather away from the $13500 area. Our upside breakout target on Bitcoin was around $10k by Christmas which shows just how off mark we were on our bull target for the close of the year. Many thought our upside targets were radically exaggerated for that matter. No matter, we're very much long Bitcoin as our top holding in the crypto portfolio. The math is coming out soon, but as of now, had we just held Bitcoin in lieu of any of our alt coin trades, we'd be up over 150% just sitting in an entire portfolio of Bitcoin at 100% allocation. Something to acknowledge as we reposition the cyrpto folio moving into 2018, we'll be re-balancing a different strategy in our rotation methodology. And I'm not worried about it in the least as I'm confident we'll make up the difference in exploiting new breakout or bottoming setups that transpire in the coming months. We always do.
Let's discuss some of the reasons why Bitcoin is higher by another $1,000 in the last 24hrs: for one... institutions that are hungry for returns are buying Bitcoin, knowing they can hedge holdings starting next week. There are three groups of investors buying bitcoin. The first are those citizens who want to diversify away from domestic currency. The second are techies who believe decentralized blockchain is superior innovation to the Internet and are willing to speculate that digital currency will soon rule the digital world - we are very much in that latter camp. And the third group of buyers are institutional investors chasing high returns. It is estimated 16 million bitcoin’s have been mined so far. These three groups of buyers constitute heavy, heavy, heavy demand from around the world for a float of only 16 million coins. Think about that for a second....there simply isn't enough bitcoin that can be mined fast enough to fill demand. We’re now days away from adding bitcoin options to the portfolio. Buckle up.
Following bitcoin, the second and third largest trends in the market are low volatility and oil. Let’s analyze each:
Trend #2: Low Volatility. Trends of low volatility and oil both began February 11, 2016 when central banks rescued oil prices from collapsing below $26.50/barrel. Low volatility as measured by UVXY has dropped from $5,804 to $14 ($5,804 is a split adjusted price) since 2/11/16 which is almost half the size of bitcoin’s move over the same time frame. Over these last 22 months there have been countless opportunities for volatility to spike, but no variable has been able to crack the tight grip of market manipulators. Almost every market pundit in the world is calling for a spike in volatility because history suggests this has to end sooner or later. Our simple question to these volatility forecasters is if the threat of trade wars, nuclear wars, Brexit, Chinese debt, Saudi Arabian chaos, central bank tightening, or weak earnings can’t derail the trend of low volatility then what will? As head of the president’s plunge protection team, Treasury Secretary Steve Mnuchin has turned the Treasury trading desk into a Goldman Sachs market maker with a mission of stability and liquidity. No other president in memory has been so engaged with minute by minute moves in the stock market like President Trump has been. Trump comments about it, he tweets about it, and he uses it as a source of political victory. Now that tax reform has succeeded in the House and Senate, only one more hurdle is required before it passes into law. This catalyst is expected to support low volatility moving forward into 2018. Confirmation of market-friendly (and Mnuchin buddy) Jerome Powell as the new Fed Chairman only helps the cause.
Rejection of risk has become a defining attribute of Trump’s stock market. One of the best ways to play the trend of low volatility is owning $UVXY put options. At some point we will likely add exposure in this area. We have yet to do so only because we have no technical precedent in history where low volatility has lasted this long. In other words, we think it's just a matter of time for a correctional bump to occur. That correction will very likely be another buying opportunity...toward the bottom of that correction, that's where we want to add exposure to $UVXY put options which would put us in synch with prospects for trend continuation. What could derail this trend of low volatility? Any negative variable that is supported by the plunge protection team as being worthy of causing a correction. Failure to pass tax reform was already mentioned by Mnuchin as a variable to cause a market correction. What about a government shutdown? Perhaps. What about chaos in the Middle East? Unlikely, because it’s already happened without any market repercussion.
Trend #3: Oil. WTI crude has rallied from $26.50 to $56 over the last 22 months. After a coordinated effort by central banks around the world to rescue the its banking system from the risk of energy debt defaults, OPEC smartly jumped on the bandwagon by announcing production cuts. This week, those production cuts were extended into 2018. Ahead of his IPO for state owned oil company Saudi Aramco, Mohammad Bin Salman is provoking Iran to war. If Iran oil production is constrained either by war or economic sanctions, it will further boost the price of oil. It has been well documented that Trump, Bin Salman and Israel’s Netanyahu have formed an alliance rooted in anti-Iran sentiment. We expect Iranian sanctions will impact oil in 2018.
As an unexpected variable, President Trump is moving forward with plans to move the U.S. embassy from Tel Aviv to Jerusalem in support of Israel. Such a bold move risks stability among the Arab world. Palestinians, Turks and Jordanians are in an uproar over the announcement. Any sort of violent response (Declaration of War, Day of Rage) could have an impact on oil. As we await availability of bitcoin options, we may increase our stock portfolio waiting in our Oil play on those $USO options calls. The next momentum purchase point is set at $11.75.
Summary: These three trends of rising bitcoin, low volatility and higher oil create a nicely hedged portfolio. If the status quo continues, all three will rise. If volatility increases, then demand for bitcoin and/or oil will likely rise. If bitcoin endures a major correction it implies establishment stability and low volatility. Either way, one the Bitcoin correction does come, it will be just another buying opportunity. Bitcoin has $50k to $70k written all over it's 2018 growth story.
As a follow up to Monday's post regarding Bitcoin and the pricing of risk…check out the following statements from various national government officials who have 100% misdiagnosed the reason for bitcoin’s rally. These government officials refuse to acknowledge their own addiction to spending, debt and the $1 quadrillion in derivatives that has created an unsustainable economic environment. Each of the following quotes from establishment leaders was given over the past week:
In Turkey, the state director of religious affairs announced that bitcoin is ‘not compatible’ with Islam due to its government being unable to control it. ‘Buying and selling virtual currencies is not compatible with religion at this time because of the fact that their valuation is open to speculation. They can be easily used in illegal activities like money laundering, and they are not under the state’s audit and surveillance.’ As you read this, keep in mind this is coming from Turkey…one of the most corrupt nations on planet earth.
In Holland a Dutch newspaper urged citizens to ‘sell their bitcoins patriotically because cryptocurrencies can undermine government and destabilize the economy…the profits of new bitcoins do not benefit the government as with normal money creation, but are absorbed in environmentally harmful computer power…Central banks have less influence on keeping the economy stable. The bank has no control over the bitcoin economy and an economic crisis can become deeper.’ Thanks for your thoughts Holland, definitely not a profit power house by any stretch of the imagination.
In France, Robert Ophele, chairman of France’s market regulator, said ‘It bitcoin was a currency it would be a bad one as it poses major challenges for central banks and regulators…putting money in an empty type of asset is very, very worrying…cryptocurrencies are a way to commit cybercrime allowing access to illicit goods and services.’ So you’re saying money laundering and cybercrime don’t happen already? The USD is the number one vehicle of current money laundering, cybercrime & domestic tax evasion as it is. Nothing new.
Listen to this interview of Rick Falkvinge, CEO of BitCoin Cash and founder of the Swedish Pirate Party assert this statement of money laundering in his larger correspondence about how Bitcoin & the blockchain revolution of peer to peer decentralized exchange of value will inevitably replace the big banks. Far cry? Think BotTrigger's going off the libertarian cliff? Just really pay attention to what's happening. A vast majority of people are not watching the show unravel. You all here are:
In the UK ministers intend to ‘begin regulating the virtual currency to bring it in line with rules of anti-money laundering and counter-terrorism financial legislation.
In the United States, Senator Dianne Feinstein is tackling bill S.1241 that aims to criminalize the intentional concealment of ownership or control of a financial account. The bill would amend the definition of ‘financial account’ and ‘financial institution’ to include digital currencies and digital exchanges. So…should we talk about all those concealed offshore accounts owned by Jared Kushner, Rex Tillerson, Gary Cohn, Steve Mnuchin and Wilbur Ross that were recently leaked? Ouch.
Also, keep in mind, that the US government is not that dumb....they're very careful to over regulate at this point as they know that any staunch over-reaching attempt to regulate forcefully would only embolden the cyber & blockchain free enterprise community to build against & around it. Net neutrality already has power forces in play from the super cape of silicon valley backers behind another Blockchain ICO coming in early 2018 called Orchid of Orchid Labs https://orchidprotocol.com/
Think of it as the ultimate decentralized internet protocol layer that no government could censor or shut down. This would essentially also replace the need for any Tor Browser or IP vanishing tool or geo-fencing for that matter. This is a very powerful tool and I assure you that the Orchid ICO will likely go down in 2018 history as being one of the most highly capitalized ICO...I would venture to say in the top 5 of largest capital raises that occurs. What's more, beyond the silicon valley backers on this project from Sequio Capital to Tim Draper of DFJ to Andreesen Horowitz & Blockchain Capital to name a few, the cofounding team are a group of tech & blockchain rockstars from: Jay Freeman who created Cydia of Saurik IT, the first ever market place for apps of jail-broken iOs devices who wanted more freedom to mod their devices ; to Gustav Simonsson one of the lead developers / cofounders of the Ethereum project ; to Brian Fox all of which are renowned rockstars in the developer & blockchain community.
My point is, this is an example of how Silicon Valley is funding the resistance front on technology that can truly change the world.
If anyone remembers where season 4 of Silicon Valley left off with Richard's ahha! epiphany! ...Orchid is very likely it.
China currently doesn't have an actual internet, instead they have something more that resembles an inTRAnet, more than anything else.
Continuing on, in India, their central bank is in process of answering a petition regarding bitcoin, as finance minister Arun Jaitley comments, ‘The government’s position is clear, we don’t recognize this as legal currency as of now.’
Collectively, these statements sound similar to the kinds of things we’ve heard from previous industries just prior to disruption. We heard the same rhetoric from the taxi industry as Uber out-innovated the legacy system. We heard it from Blackberry when iPhone came out. Don’t these government officials realize their statements inadvertently advertise in favor of bitcoin? Citizens no longer want governments in places like Turkey, Venezuela, or India to have any control over their money. A war is already occurring between decentralized blockchain and the establishment. Two months ago, bitcoin would have tanked on any negative statement from a government official. Not anymore. Bitcoin is already above $13,500 and I've been repeatedly touting to Members to get your first Bitcoin coin(s) since back around the $1500 area where our first ever buy alert was @ $1460 on 5/1/17. By far our most incredible gainer of the year was in the crypto portfolio.
The problem for each of these national governments is that bitcoin is global. We’ve already seen this play out in China. Any local law that seeks to over-regulate bitcoin is easily skirted. The horse is out of the barn.
As bitcoin call and put options are introduced in the United States next week, we plan to add exposure. Now we are not blind to a Bitcoin correction. Any asset that has rallied as quickly as bitcoin is susceptible to profit taking. Of course we’re not naive to the probability of significant corrections as we've demonstrated with a near perfect record on reducing our Bitcoin allocation before major corrections took place. We'll continue to stalk where that next major correction occurs. Now with Bitcoin being introduced for options trading, this will allow us to merge Bitcoin as a core part of our Stocks group alert service. It’s the allure of volatility in either direction that is most enticing. A straddle strategy that rotates into either side of the trade based upon momentum points is poised for profits in 2018. Our fundamental bias is to the upside, but we will be blind to bias as technicals take over. For now, we're trading what's right in front of us and that's to squarely be long Bitcoin. As of this time, we have ZERO sell signals on Bitcoin. What we'll be watching for is how the BTC options dynamic transpires and if there's a plan to pull the rug out from beneath those call options buyers...we'll be able to see it soon enough. What's important to note however, Bitcoin's supply and demand economics are ENTIRELY DIFFERENT to that of how stocks can be manipulated or pinned for the purposes of expiring options worthless. Pinning options is a BIG BIG business for market makers. They actively orchestrate bear raid attacks for the purposes of causing selloffs so that options expire worthless, meanwhile allowing them to reload near the bottom of those selloffs whilst selling put option premiums at those lows....riding stocks back up and rinse and repeat. In casual context, this has been a predominate theme for stock behavior.
However with Bitcoin, even though Market makers may try an attempt to pin Bitcoin like they do in the traditional stock market... to expire options worthless..you have to remember that the supply/mining dynamics on $BTC make market manipulation near obsolete in this regard. Not that it can't happen, but the strong hold of Bitcoin allocation is very likely not centrally controlled by any large enough adversary on the CME side of the fence. With a 21m supply cap and currently only around 16m in circulation at the present time ....Bitcoin can't be mined fast enough to fill demand. Now consider that Super-pac governments are (perhaps under the radar) already racing to try & accumulate as much Bitcoin as they can as a hedge from currency flight. In an attempt to get a strong hold on controlling what little control the banking/government systems have left in the future, super-pac governments are very likely part of the uproar in Bitcoin accumulation that's been occurring.
Point is....Traders / Market-Makers are going to learn a lesson about immutability...