In what appears to be an inception level-turn of events, US riots and protests have now pulled the rug out from under covid-19 as if it never even existed as the US struggles with country-wide mayhem.
Indeed, without getting into too many details, what’s happening in the US right now is tragic and it’s a shame to see the global leader seemingly without any leadership. Time will tell how bad things get but it’s safe to say that 40 million unemployed citizens, mountains of individual debt and nefarious ideologies are playing their part in this concoction of manifestations, riots and looting sprees. All I can say is that bitcoin is the peaceful protest to the global ponzi scheme we call fiat money, and amidst all the chaos, it’s still there.
“ I don’t believe we shall ever have a good money again before we take the thing out of the hands of government, that is, we can’t take it violently out of the hands of government, all we can do is by some sly roundabout way introduce something that they can’t stop.”
— Friedrich Hayek
In any case, let’s dive right in.
Peter Schiff comes out of the woodwork
Popular gold-bug Peter Schiff has once again come out to throw a jab at bitcoin, labelled its recent rally from $9,100 to $9,600 as manipulation. Mr. Schiff was answering a tweet by the co-founder of Gemini exchange, Tyler Winklevoss, who commented on the fear, uncertainty and doubt spread by Goldman Sachs’ conference call on the 27th of May. As he often does, Peter’s comments were completely off the mark, as he claimed that bitcoin was a pyramid scheme that had run out of fools and whales like as Tyler to keep its momentum going.
After the initial jab, Tyler’s sarcasm came through, as he teased that the supply of fools won’t be running low any time soon. (Who said Americans didn’t get sarcasm?)
While this is all good fun and makes for great Twitter-tainment, the reality of the situation is that the only ones with access to money printers are fiat-currency central bankers, who are now having to consider negative interest rates amidst a crumbling system that looks like a slow-motion car crash. Indeed, the Bank of England has hinted another rate cut, which is most likely a prelude to the real negative rates that will inevitably come. Briefly, negative interest rates would mean that you would have to pay your bank simply to hold your money in addition to fiat’s minimum 2% loss in purchasing power per annum. Truth be told, who would do that when you can create a bitcoin savings account by storing your wealth in a hardware wallet under your mattress? The incentives and lived experiences all point to one direction.
Goldman Sachs snubs bitcoin
However, while some institutions like JP Morgan have chosen to embrace this direction, the conventional old-guard have opted to stick to their guns, even if the gunpowder is wet. Indeed, the much-hyped Goldman Sachs conference-call didn’t live up to expectations, both in its outcome and research rigour. It’s almost as if Goldman have entirely lost the plot with such comments as they stubbornly fail to comprehend that bitcoin is not a stock, but a superior form of money. To give you one point of contact, the references to volatility in comparison to stocks doesn’t really stand up to scrutiny given that the 36% crash in the S&P wiped out nearly 4 years of gains in a month — and these are supposedly matured triple-A rated investments. The rudimentary deck also failed to address the fact that stocks are quite literally behaving like a shitcoin (pardon my French). There’s no other way to say it: earnings are down, a deadly virus is on the lose (or so we were told), and now mass unemployment and riots are part of everyday life. Despite this lived reality, the S&P is just 10% away from all time highs. I’d like to see a GS analyst compare any quarter of 2019 with 2020 and make the case that this is all fine with a straight face.
Ethereum open interest reaches new levels
Fresh data provided by Skew analytics has revealed that options contracts for Ethereum on Deribit exchange have reached a new high of over $108 million in open interest.
In layman’s terms, this means that investors are hedging their wagers on Ethereum’s price over the next few months, while those issuing the contract are looking to gain in the short term. When put together, it all adds up to a level of activity not seen since 2019, when ETH was valued at around $370. Indeed, these levels of open interest indicate that something is brewing, specifically with the much anticipated PoW-PoS transition scheduled for release in just a few months. Of course, the sky is the limit for upside on open interest, and paints a bullish picture for the cryptocurrency for the second half of 2020.
Check out the full story here.
Short term tinkering
Since the last newsletter, bitcoin enjoyed a 10% rally as it broke out from a text-book falling wedge structure to $9,752 ( Bitfinex). As it stands, bitcoin has witnessed a series of higher highs in price and lower highs on the Relative Strength Index, suggesting a notable bearish divergence on the 4-hour time frame. This divergence is much clearer on the Money Flow Index (MFI). Since printing its TD-sequential 9, bitcoin marginally retraced to around $9,300 and is now sitting at $9,545 as it hugs the 8th of may resistance trend line. From a bullish perspective, the $10,500 mark is still the upside target, and this is a distinct possibility as all high-time frames are bullish including the daily, weekly and the monthly.
Given bitcoin’s flag formation, the two most probable outcomes are either consolidation within the structure or a major bullish break above $10,000 which would be accompanied by a surge of volatility. Should bitcoin get rejected here, then the lower $9,000 range would provide support along with the 200-EMA on the 4-hour chart. If this were to breakdown, bitcoin would then find some respite in the $8,500 level on the setup trend line. As it stands, bitcoin is simply ranging within this consolidation structure.
Zooming out onto the weekly chart, bitcoin is either setting up for a few weeks of correction or for another rally similar to the starting stages of the 2019 mini-bull run, but on a much larger scale. The TD-sequential 9 on the weekly time frame, is suggesting that a correction is likely sometime in June, but back in 2019 this indicator wasn’t respected to any extent. From a fundamental perspective, it’s arguable that the sequence of events that have preceded bitcoin’s latest uptrend are just getting started, and technical indicators suggesting upper limits might be losing their significance amidst a paradigm shift that is difficult to quantify. Having said that, unless there’s a solid break above $10,500, then it’s safe to assume that current price-action is a bull trap and a period of consolidation would ensue. The 50-weekly EMA would offer initial support should the market keel over, but given that this area has been tested before, it’s unlikely that it would hold (on a weekly perspective), which would open the door the the lower $6,000 area amidst the setup trend line and high trading volumes.
p.s. I’d expect the $7,500 region mentioned in prior newsletters to offer support on a daily time frame.
Bitcoin’s monthly candle closed bullish at $9,465, having arguably broken out of the bullish pennant formed during the 2019 mini bull run. This candle close opens the door to much more upside, with the first target being the $11,700 CME gap (on lower time frames), second being the last high of $14,000, and the third being the all-time high of $20,000. Once these levels are broken, the sky is truly the limit as bulls venture into uncharted territory with blue skies through and through.
Since all we have are power-law S2F projections for this eventuality, then the only reference point we can look to is PlanB’s stock to flow model, which has just printed its first red dot in what is a would-be multi-year bull marathon (as per the model’s predictions). Of course, from an analytical perspective this should be taken with a grain of salt and there is no such thing as a straight line up. Then again, the conditions for these projections to come to life could not be better so I can completely understand your predicament in attempting to contain your excitement. After all, enthusiasm and levelheadedness are not mutually exclusive, even though they could be with enough effort.
Thanks for reading and have an excellent day!
Full story: Goldman Sachs snubs bitcoin and cryptocurrencies in client call
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