It’s clear now that Bitcoin is becoming thought of as a safe haven asset par excellence. I find it funny that RT trots out Peter Schiff to remind us that only gold is real and all other safe havens aren’t.
He’s like the central bankers, he still thinks we can’t see him talking his book. I hate to break it to you folks but, like gold (which this blog is named after for just a few reasons), Bitcoin has no counter-party risk.
And in a society in which leverage is the only thing keeping asset prices afloat counter-party risk is, rightly, the one thing you have to make sure you can control.
Volatility is not counter-party risk. Volatility is simply currency risk. Like gold with Bitcoin all that matters is how much/many you have. Not how many U.S. dollars they are worth. What matters is what they buy you, not how quickly you can cash out of it.
The only reason people still obsess about Bitcoin’s and Gold’s dollar price is because they have not eliminated dollar-denominated counter-party risk from their lives.
This means debt and other liabilities. Once you free yourself from those things then “HODLing” your Bitcoins or “Stacking” gold coins is how you measure your wealth.
And as things get weirder, a liquid, transportable safe haven asset like Bitcoin becomes really attractive.
In the past 24 hours Bitcoin has shot up more than 16% and more than 46% in the past seven days.
These are numbers that defy even the 2017 bull market. And the truth is that retail hasn’t even gotten on board the train yet. So, is it a bubble? Or is this something far different.
Google trends are well below mania levels from 2017 and 2018:
In fact, retail was so burned by the 2017 melt up and down that millions of people will not go back into cryptocurrencies if you gifted them some.
As we approach the end of Q2 this week it’s important to recognize just how big this latest move up has been. As I was putting together the charts today for my Wednesday Market Report for my Patrons I realized that (at the time) Bitcoin was within $1000 of its all-time high monthly closing price.
Now that gap is just $300. And there’s four days left before the monthly (and quarterly close).
What’s driving this other than a new emerging FOMO trade?
Yesterday on-chain settled Bitcoin futures contracts from Ledger X were approved by the CFTC. These are completely different than the dollar-settled COMEX futures contracts which are a source of ‘paper Bitcoins’ used to create a wag the dog environment gold and silver investors know all too well, not to mention Merrill Lynch prop desk traders.
These futures contracts have the potential to be game-changers as now HODLer’s can utilize their savings to generate income off of their stash without creating excess supply, which can do nothing except suppress the price.
I’m all for futures contracts for coordinating supply and demand through time. But cash-settled contracts are nothing but speculation vehicles rife for spoofing and market manipulation. The less they dominate markets the better.
But this run up towards the end of this month into the end of Q2 may be morphing quickly into a FOMO rally that could see a blow-off top in the near future.
Markets that go vertical without really pausing to take a breather will always correct down. Hard.
When that happens given the expansion of Bitcoin’s dominance of the crypto market by market cap percentage in the past few weeks, I would expect to see some strong rotation into both cash and alt coins just clearing major technical hurdles on any correction.
And just so we’re clear as to what’s happening here. The mother of all safe haven trades is emerging. Trade Wars, Near Hot Ones, tariffs, sanctions, popular uprisings and political instability are all on the table.
While we’re all focused on whatever short-term idiocy comes out of Donald Trump’s mouth to secure his control over the Overton Window, we should be asking ourselves why the ECB is going looking at even more negative rates, LIBOR has inverted alongside Eurodollar and the U.S. Treasury market and stocks are at all-time highs.
The markets aren’t irrational. Our perceptions of what is driving this behavior is. Safe haven assets change with the times.
And when you step back from the insanity of the fiscal and political situation in the U.S. and Europe, the fall-out from their instability on emerging markets and the potential for major shifts in the geopolitical game board does it really seem all that odd that a simple electronic proxy for gold with thin supply, high trust and low holding risk would become a darling of the risk averse?
I don’t.
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