Bitcoin Observations
This is NOT investment advice.
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The Bitcoin Lid and Current External Shock
From time to time I've commented about my skepticism around "the cycles". The image shown below helps explain why along with my description of Bitcoin as beach ball in this analysis of the Yen Carry Trade. Here we go again.
From the most aggressive Fed hikes in history (true, not 'playing victim') to the FTX debacle and ensuing increase in political attacks and friction to the now infamous Trump Reset . . . . . . . looks to me like Bitcoin has spent five years either entering and engaging with a new 'crisis', recovering from said 'crisis', and working up some steam and momentum only to encounter the new 'crisis'. I don't see any time in here where the general population really jumped aboard and ran with it. Business and Institutional Level usage and adoption is up. Addresses are up. But how much is Bitcoin really intertwined into day to day society and life? We are still very early.
This is excellent news and confirmation for those patient with an extended time horizon. Doesn't mean there won't be drama in the here and now, and this series of posts here highlighted the inevitable hits to GDP and growth coming. The current administration is literally telling you to avoid equity prices and prepare for some rough patches that might take 6-9 months to work out. Looks to me like they not only see what we warned about 6-10 weeks ago but they want to accelerate it and jam the pain into a shorter period of time rather than letting it drag out (see below for my efforts on improving and expanding my hedging). And don't forget about the typically fear porn driven "government shutdown looming" . . . . . this time maybe there will be some type of action or consequence (market reads more uncertainty first thing).
"we need to buy some time"
"what we are doing is so big"
"big things are coming"
Here is an anecdotal yet poignant example:
As a shareholder in StartEngine for a long time now, I monitor the trends and what is going on with Reg CF and A+ like what is described above by Kingscrowd. Upon the Trump victory activity most certainly picked up, and now it is fading along with the overall Risk Off sentiment. Sure, this is a small sample size and one observation point, but it fits with the rapid shifts in sentiment we are clearly seeing.
What is the Trump Reset? The Trump Administration wants lower rates and a lower dollar. Ok, so is that all bad? Let's start first by looking at the size of one of the areas of focus:
The 'stock market' to use a collective term gets a lot of revenue and profit from overseas, meaning a lot of business is influenced by FX. Example: CEO of American company places manufacturing facility in another country entirely due to FX advantages. Example: CEO of foreign company does not put manufacturing/jobs in America due to FX advantage. Trump wants a much lower dollar and yields on the 10Y. Jawboning and pulling a rug pull on the fraud/grift in government spending can accomplish a few things:
- give relief to yields via the "flight to doomsday"
- weaken DXY given projected slowing economy
- shine a bright light on weakness thus putting more pressure on the Fed (ignore for now SPV 2020 Treasury absorbing Fed as they might still be keeping that under wraps)
So, use the market forces now to steer the giant aircraft carrier in the right direction and the Fed comes in to add the fuel and energy to move it along (lower DXY, higher UST (prices))? Is this the plan? Bessent even said to ignore a Trump Put and focus on a Trump Call (conveniently not mentioning when and at what price to buy the Trump Call).
FASB, SAB 121, SBR inspiring confidence in more institutional/government allocation . . . . . . . yes, yes, yes . . . . . . all good things . . . . . and don't overlook the fuse China can spark underneath BTC as well and already is to some extent. All true. But, none of these negate the overall environment which does impact the day to day price action and user adoption.
If I'm wrong it rockets off of this 74k-77k zone where all the liquidity is and doesn't stop for long at 91K. Maybe I'm completely wrong and we are right back into Wave 3, and I understand the charts and the setup, etc. This correction is well 'within range' so to speak - but we do now have an external factor hanging over clearly not perceived from Nov 2024-Jan 2025. Bessent did not say Bitcoin is garbage. In fact - his erstwhile and honest pursuit of the SBR states the exact opposite. He is saying, in my view, there are times - in the context of risk assets - when perhaps it is prudent to either step out of the way and/or be in a position to act accordingly.
Supposedly the debt problem "is all solved now" with some type of magic wand like a 100 YR Zero Coupon Bond, a tool/method that evades me as to how it would work without using BTC or Gold in some way. Supposedly Americans won't have the tax man's boot on their neck, but when and how will this come to be? Low rates and lower dollar are actually very, very bullish for Bitcoin, but right now it feels like the bridge to getting there is a bridge too far perhaps.
Market has been sniffing out perhaps the most important difference with the election:
Man Known as 'Joe Biden' - Fed in QT yes selling UST and MBS, but Yellen games on the short end and TGA create mini-QE and liquidity to cover up, don't forget about BTFP but also RRP, BOJ uber dove, all while gaslighting the public with how awesome and amazing everything is regarding government spending and jobs and part time jobs taken by "newcomers"
Trump - No TGA games, muted short end games, QT continues, no official signal of even halting QT much less more liquidity (yes global liquidity rising), big job cuts and cuts to GDP, BOJ hawk, and we're told to "wait for something real big"
The man playing 'Joe Biden', when comparing his total time to the first 90 days of Trump, was tossing around more liquidity.
*Yes I realize POTUS does not directly control all liquidity, just drawing a comparison between the two environments in a general sense.
Enough doom and gloom - ready for a plot twist? Next tradable hedge/move could very well be long BTC.
SBR
Strategic Bitcoin Reserve is huge. Might be the biggest "news event" to ever hit Bitcoin. The United States Treasury won't sell its Bitcoin, separated it from other coins, and tasked two Cabinet Members with finding budget neutral ways of buying more Bitcoin.
Got me thinking more about like actual real stuff that is here now in the real world and Bitcoin - things other than anticipations of major positive demand shocks. Here's what I came up with as the two biggest:
Capture Excess Energy: This starts to tease the broader concept of Energy = Bitcoin = Money (another topic to discuss). This is happening right here and right now. There are scenarios within the energy sector where excess and wasted energy (which is harmful to the environment) is captured and converted to real value via Bitcoin mining. That is a component now within the ecosystem potentially embedded forever. This is not possible with Solana. Nor is it possible with Ethereum (most don't realize Ether tried Proof of Work and switched to Proof of Stake). Literally the ONLY way this is possible is with Bitcoin.
USDT Lightning: People in the economy across the globe love to be able to easily send native fiat back and forth. Despite what ardent Bitcoin supporters might think about this, it is a fact. Zelle and Venmo are approaching the mainstream and the Lightning Network is a few steps ahead of the typical person. Tether on the Lightning Network aligns Bitcoin right up against an activity that is already firmly established within society and humanity, and one arguably growing with the growth of stablecoins. This is a strong example of Bitcoin "actually doing something" other than providing liquidity for financial speculation. Bitcoin is the foundation for the Lightning Network and thus embedded into the foundation of stablecoins in this scenario and the day to day flow of "normal currency" used ubiquitously throughout society.
These are real things here and now, unlike abstract projections about Web3, Web4, Web5, "AI Powered blah, blah, blah" . . . . . . . . . . . and to be clear this is not a knock against technology speculation about the future.
Mining Hedging
Have been using hedges throughout, but not aggressive enough in terms of size and variety. Simply maintaining a wide open mind to include a protracted period of frustrating and very volatile price action. Spent time last two weeks increasing size and use of hedges and ensuring capacity available and liquid. Intent is to position prudently and use hedges to cover operating expenses should the market move in ways that create those types of payoffs on the hedges.
Nothing time based. Clear out short term credit. Higher cash balances. Main tools levered long/short BTC, JPY/JGB. Personal - added to allocations.
African Bitcoiners
Wonderful organization helping people and businesses in Africa and throughout the world - African Bitcoiners.
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Alex Grey
The Great Turn
