| Bitcoin and crypto is keeping the wrong kind of company. What do we mean?In the chart below, we have illustrated Bitcoin against ARKK. ARKK 2D compared with Bitcoin |
| The failing ETF fund, is actually a leading, lower beta version of Bitcoin, for the data under review, from March 2020 events, through to today.From the chart it’s clear that ARKK began going up before Bitcoin in March 2020, during the great stimulus, and Bitcoin, like silver to gold, only really started catching up and overperforming subsequently.There was also a clear divergence when ARKK topped out and failed to make a new high, however, Bitcoin still made 69K after the 64K. This started to show the depletion of the stimulus effect on ARKK, which had record withdrawals last month.Conversely, Bitcoin can be seen as a lagging, higher beta version, of the failing exchange traded fund run by Cathie Wood. Bitcoin could be compared to other tech equities, so this is an intentionally provocative comparison. However, it does illustrate that Bitcoin is lagging and underperforming on the downside compared to an already badly performing ETF. Imagine the withdrawals and the degree of exits from Bitcoin to surpass that which is occurring in ARKK?Another key question is: have we made a reversal to the upside on the Dollar Index on the Core CPI and CPI news? Are we in the process of making a second rising wedge structure as shown in the chart below.Will the Feds rate decision tomorrow, [Expected 75bps] drive the Dollar higher, or cause a localized top?DXY 1D rising wedge |
| When the Dollar is strong and surging as per that rejection candle that has moved up, there is weakness in Bitcoin.See our video below why not to trust the “Judas rally” in Bitcoin, at the end of this mail for more detail. When the Euro is rallying from its parity point, Bitcoin and the Euro go up together.See the Euro USD chart below. When the Dollar is dominant, Bitcoin and the Euro clearly go down. The Dollar Index is made up of 52% Euro, so it’s very close to being an inverted Euro USD chart. EURUSD 3D at parity point |
| With risks mostly being to the downside, people are expecting a FED policy pivot, that in our view will be very late in coming, and hampered by stubborn inflation that does not go away.This is on top of an environment where Biden has been depleting the strategic fuel reserves of the United Sates and dumping this fuel on the market, in order to create surplus supply and reduce the price of energies, with view to reducing the perception of the trajectory on the inflation statistics.The Core CPI numbers came in high, in spite of energies being down, as a result of this governmental manipulation. This energy manipulation effect, can’t be continued for too long unless the US plans to run its strategic reserves down dangerous levels! Watch our video: Bitcoin: Beware the Judas Rally |
| In summary: Bitcoin and crypto may continue a little higher in the short term, but in our opinion this ‘Judas Rally’ may form a larger continuation pattern for the downside.We’re expecting a turbulent last 10 days of September, October and into quarter four of the year, especially as winter starts to roll in for Europe and some of the massive wholesale hikes in energy prices are passed on to consumers.Recessional type conditions are expected, except that there are no more “normal” recessions. They invariably manifest in scale as depressions, which will lead to a great downturn in GDP and productivity. There is also the possibility of medical related lockdowns and power grid shutdowns. In a manufacturing powerhouse like Germany, this will be devastating for their economy, and for the Euro.We expect Bitcoin’s new friend, the Euro, to go down substantially during the course of this winter on account of energy costs, inflation, and the need to reign in inflation.We also expect the ARKK ETF to continue downside, due to high interest rates, as the FED seems determined to continue to fight very stubborn inflation at the cost of economic growth, which will lead to a terrible environment for high growth tech. This will be the “Big Short” all over again, with plenty of outside risks, that have also been warned about, during a very tentative period of time, during September and October, which has often coincided with big crashes. To find out how to survive, thrive and defend your wealth during these uncertain times click the link below to talk to us. |
Warm wishes, Francis & The Market Sniper Team |