Past analysis and current fundamentals, gold and leverage

6 Ağu 2019

In my previous analysis I had told myself that I wouldn't tweet much and just post analysis on Tradingview. Tweeting has consumed too much of my time and made me even forget to update my analysis here. Twitter is a great platform, but using it for complex trading ideas really isn't good. Not only that but I keep wasting my time without any reason. So from now on I will be pinning my latest analysis on my profile and below it there will be updates. Every few days or weeks I will create a new analysis so that the comment area doesn't get too long, especially in case my outlook changes.

This will save me a lot of time from tweeting too much and will help myself and everyone follow my analysis better. Tradingview is a great tool for accountability and being able to follow through your own analysis. It might sound stupid, but why make a long analysis if you don't follow it? For me personally it is very helpful to write stuff down before I execute. It gives me a much clearer picture of what I have in my head precisely because I have so many thoughts and tools, that just keeping them in my head makes things messy.

My previous analysis came when Bitcoin was at 10k

and we dropped down to 9.1k. I had mentioned the flip of sentiment above 10300-10600-11300. When we went lower I made several tweets explaining why I flipped bullish. Main thing was that the lower we went, the lower the price where a trend flip would occur. 10300 held as resistance several times in a row and it was very clear that breaking it would confirm a change in the direction. My wake up call for buying back my coins was when on everything I saw on twitter and tradingview, was pretty much overwhelmingly bearish. Polls, tweets and ideas from people expecting 8500 and waiting for it. That happened at 9700 so I escaped, but didn't start building my leveraged position until 10400. This analysis will be focused on the current fundamental economic landscape while comparing Bitcoin with gold. It is just to state my bullishness while the technical part will be brief and separete (will come soon and will add my old tweets there too). Will explain the current situation and see how people could play this.

I am one of the biggest believers in Bitcoin and have been for years. To me having everything in Bitcoin is just common sense. It has been and will be a true safe heaver and the best investment that has ever existed. True money, true digital gold. My respect for it made me suffer in the bear market, but all that is now gone. Now I am longing the heck out of it. No more errors, no more disbelief, no more fear. I've spend the last 4-5 years of my life thinking about Bitcoin, markets, economics and money daily from a million different angles. In my honest opinion diversification is for those that don't either don't have conviction, they deal with securities, manage other peoples money or in general have low risk preference. It is also for those that don't really know what they are doing. Bitcoin is something very hard to understand and it is also very volatile, so it is normal for people to avoid putting much into it. Now in the case of diversifying in various cryptos it has been very obvious why it is a very dum idea. Shitcoins are only good for trading and nothing else.

Fun fact is that in its 10 year history, Bitcoin has never gone up 340% after a 80%+ drop to stop there and reverse. It is purely a momentum driven market that is mostly uncorrelated with most other markets. So once it is trending, it keeps on trending for quite some time, regardless of the direction (be that bearish or bullish). Yes this time might be different, but based on its current fundamentals and the global macro environment, being bearish Bitcoin makes very little sense to me. Seeing the full picture is pretty hard as it has taken me years and a lot of devotion to get it, as well as follow all the developments in the crypto space. My advice is go back to the Bitcoin chart and study its movements. Observe its idiosyncrasie, feel the market.

Short term plays are different and Bitcoin can drop any time. In my honest opinion however most people that are calling for sub 9k are people that wish they bought the dip or are just greedy and want to buy lower. The market isn't so kind though and most people won't get what they want. 8000-8500 was clearly front run by whales the exact same way 2500-2700 was front run and we bottomed at 3100. Corrections tend to last less and get smaller percentage wise through time as the market matures and Bitcoin is becoming more and more scarce. In 2016-2017 it ranged from 30-40% and the longer they lasted was 34-47 days. This time the correction was 35% deep and lasted 32 days.

We now have major players stepping in like Jack Dorsey (CEO of Twitter), who has not only has invested in Bitcoin, but his company Square also offers Bitcoin buying and selling, while he has directly invested in Bitcoin development. At the same time we've seen institutions go long on CME, while Bitcoin is talked about everywhere: from CNBC to the Congress and Senate of the US. All this at a time where Central Banks are cornered and forced to cut rates and print money. They can't stop. It is impossible for fiat currencies not to collapse. Impossible. They are a massive ponzi scheme and illusion.

Now you might think, why not invest in Gold? Well gold could go up and after some time I am finally not against buying it (could be a sell signal), but it is severely lacking many important properties that are necessary for something to be money in our days. It is hard to transfer, it is hard to divide, it is hard to verify if it is real gold, it is hard to store safely, it is easy to manipulate its price due to centralized clearing houses, it is hard to audit the supply, it has the risk of being inflated through technological progress and central banks control 20% of the supply. The moment someone else is holding your gold, it is easy for them to censor your transactions or confiscate your gold. Money based on Gold is also very easy to devalue as governments can control the supply very easily. Finally most people that believe in gold will be dead in 10-20-30 years. It is primarily old people who are unable to accept that there is a paradigm shift, whereas young people were born in a world were all new technology seems natural to them. Yes Gold has been and will keep on being stable for some time, but its usefulness ceases to exist in a world where all transactions are done on the digital realm. It is also useless in cases where governments become oppressive. E-gold has failed before and it is a pretty dum idea overall as history has taught us.

Now back to Bitcoin. Bitcoin's true market cap is somewhere around 150-200B and has superior properties to gold. Easier to buy, easier to transfer, impossible to censor, attracts gamblers, provides use cases like Bitmex, Abra, tokens and many other things, harder to manipulate without being caught, easier to store and hide, central banks don't own any, it is global, it is peer to peer, it is programmable, it can't be inflated, its inflation schedule is predetermined, it will have lower inflation that gold in a few years and it can't be debased or controlled by governments. All these mean the upside is much much larger and it's potential to be used as every day money is much larger.

I don't wanna repeat all the bullish fundamentals for Bitcoin in terms of current developments as many people here won't even understand what I am talking about. Just a few really important points as to what happens in a case of a global collapse: Most people here survived an 85% drop and several more than once. Most are not even exposed to stocks and their overall Bitcoin exposure is pretty small compared to their net worth.

At the same time Bitcoin isn't used as collateral or held in big quantities by large institutions, banks or trading organisations. This means it is more immune than Gold in the case of global crisis. Especially in a digital world, where people are used to using their bank account, visa, paypal and all that, people might be forced to use Bitcoin as a medium of exchange in order to escape capital controls like we've seen in Greece, Cyprus, China etc. The war on cash and a potential war on Gold could seriously push people in Bitcoin as they have no other alternative.

Many big organisations are overleveraged with loans and junk bonds, stocks are elevated through coorporate buy backs and from several data it is clear than there are many leveraged position in the economy. There are too many derivatives, credit and other financial products that have helped create this bubble, while also preventing gold's bubble to pop. What percentage of the entire Bitcoin supply do you think is owned by people using leverage or credit (i.e loans, credit card buying etc) especially after a big 85% drop. Based on the current Bitfinex data, along with all the derivatives exchanges, I would say less than 5%. 5% of a 200 Billion economy that is pretty much isolated from traditional finance. Just 10B at best.