When is the next crypto bull run?
Crypto is about to get a free lesson in hard economics.
Too big to bail
Oddly, I still see a handful of CrypTwix influencers pushing a “bull market soon” type narrative. While keeping a rosy outlook might be good for their engagement, I think reality says crypto markets are about to learn some tough lessons.
As for me, aside from a couple of micro-caps, I’ve basically been all cash since early July. When I sold my positions, I was actually quite distressed. My gut told me the market was about to run.
My trading strategy disagreed.
I trusted the strat and saved myself a pretty good slide down in prices. I’ve gone against my strategy a few times in the past. It always bites me in the behind.
Lesson learnt.
Nevertheless, here we are now, watching the slow-motion train wreck that is the global economy. Let me be clear: there is no way out of this mess.
Bookmark this, ignore it, call me a buffoon, whatever you like. I can say with near certainty that when the Humpty Dumpty markets fall off the cliff, all the King’s men cannot create enough “stimulus” to fix them.
We are, unquestionably, about to enter a period of “too big to bail.”
Too big to bail means there is a functional limit on how much money the government can “print” out of thin air to prop up markets. Since the US defaulted on its debt for the second time in 1970, the money out of thin air experiment has done little except grossly distort markets, inflate bubbles, and transfer purchasing power from the bottom 99% to the top 1%.
Trouble is, much like living off credit cards, sooner or later, it takes too much new credit to keep paying for the old debt and keep living high on the hog. Doesn’t mean the central banksters of the world won’t try.
It’s just not going to work.
Japan has been bashing their collective heads against the wall for over 30 years. Despite massive interventions in their currency and markets, the Nikkei has been a shitshow the whole time.
Same is true for China now. Despite some 50-odd interventions in the Yuan, it keeps sinking like a stone. The US has been spared a lot of the pain the Japanese have felt, and the Chinese are about to feel.
I think that’s about to change.
The US was spared a lot of economic carnage because of its reserve currency status. In reality, the reserve currency status has just allowed to US to blow up an everything bubble, the likes of which the world has never seen.
Those bubbles are going to pop. Zero question in my mind.
So, what happens to crypto?
Likely nothing good happens to crypto markets when the broader markets drop like a penny off a building. Currently, the so-called “Magnificent Seven” have held up traditional markets like Atlas.
Unfortunately, Atlas is looking like he might have some back issues. To wit, Apple:
A couple of nice gaps down on the daily chart. The latter despite positive news for the company. The financial media dimwits that report on these kind of things were left scratching their heads.
Much like they were when markets last catastrophically imploded back in 2008. The fact that they are all blissfully unaware that a so-called “soft-landing” is a fairy-tale is astonishing.
And, unsurprising.
Much like their CrypTwix brethren, they don’t care about you, or what happens to your bags. They only care about viewership, engagement, clicks, etc.
Since “up-only” has been the “norm” for the last 50 or so years, they’ve all collectively bought into the idea that up-only really is normal.
But, it’s not.
History has shown us in great detail what happens when governments spend more than they take in. The last time we had two consecutive bear market years was in the 1930s.
For those of you that live under a rock, the 1930s were not great. The Great Depression was technically the first US default on debt. Back then, the US dollar was tied to gold.
The government was supposed to redeem paper dollars for a fixed sum of gold, at $20 per ounce. They spent too much though, so they didn’t have enough gold to redeem all the paper they made (and wanted to make).
So, they rug-pulled everyone, confiscated all the gold, and then gave everyone a 40% haircut on the redeemability of their now less valuable paper. Instead of $20 per ounce, they were now charging Americans (and the world writ large) $35 per ounce.
Neat trick, right?
Today, these government baboons have no constraints on how much money they can print out of thin air. Most recently, they put that ability to the test by printing enough money to cover a global economic shutdown.
The net-effect of this was an unprecedented transfer of purchasing power from the lower 99% to the top 1% of wealth holders. The little guy made a brief splash by trading digital collectibles, known as crypto currency.
What crypto creators found out was it’s far easier to pump and dump coins they make out of thin air, than it is to create a “revolutionary” block chain thingy. But, that only works when money is “easy” and credit is flowing to knuckle head ideas, like crypto pump and dumps.
Once the credit dries up, so do the pump and dumps. What I think we’ll be left with in crypto after the first wave of stock and housing market implosions will probably be Bitcoin and Ethereum.
The overwhelming likelihood is, the rest will be on a trash heap somewhere with a bunch of “diamond hands” hodlrs moving back in with their parents.
That is, if they haven’t already.
Everything has a sell price
There is no shortage of Bitcoin “believers” in the world. I rank myself on the fringes of that belief system. Many believe Bitcoin is going to solve these problems, namely unchecked purchasing power theft by central authorities.
I think it’s a remote possibility. I think it far more likely that once the stock, housing, and commercial real estate bubbles finally implode, Bitcoin is going to nuke in price.
There are still a few thousand die-hard hodlrs that bought way back when Bitcoin carried a much lower dollar value. But, those long-term hodlrs are in staggered sets.
As price gets closer and closer to their dollar break-even points, there will be more and more sell pressure. If you became an overnight million, or billionaire and then you’re watching that slowly melt away, what would you do?
Common sense says they’re going to either:
- Start selling to preserve their dollar denominated wealth; or
- They hodl into the toilet like the Doge millionaire dipshit.
Sooner or later though, companies like MicroStrategy are going to be confronted with an existential crisis. And, if entities like that start dumping, it’s going to get ugly.
Once stock and real estate markets start to dump hard, the focus of government officials is going to be trying to inflate them back up. But, as mentioned above, there is a limit to how much they can print before the printing has less and less effect.
Once that limit is reached (which I think we are at now), then we get inflation, sideways to declining markets and zero-growth. Meaning, stagflation.
The Bitcoin halving is coming soon. CrypTwix says that’s always been a bullish catalyst. I say, it’s always been a bullish catalyst when the money printer is turned up to 11 and people are investing in stupid shit because number go up.
Right now, the money printer is unplugged. Maybe the halving will be a bullish catalyst anyway. I don’t think so.
CrypTwix is convinced this is just a normal course of events for crypto. I say, it’s absolutely bonkers to think that. Crypto markets have NEVER existed in a rate and macro economic environment like the one we find ourselves in today.
Bitcoin was born after the last crisis. Crypto markets writ large were born during massive economic stimulus. Almost all of it is complete trash. Around 80% are just scams. The rest are basically pump and dump schemes.
In trad-fi parlance, we call that “malinvestment.”
When the easy credit and free-flowing money supply gets cut off, malinvestments get liquidated.
100% of the time.
Unless, of course, you’re a bond holder for a bank. Then you get bailed out. There will be no bailouts for crypto. Not to mention, the bailouts for the banks probably aren’t going to work this time around.
They’ll still try. And, you’re going to pay for that effort at the gas pump, the grocery store, on your utility bill and in your housing. You think it’s bad now, wait until they try and paper over the last giant financial chasm they made.
Enjoy.
Zombie economics
If you listen to CrypTwix, the OGs will tell you “it was just like this in the last bear market.” The advice is, keep building, keep learning, keep investing and you will be rewarded.
This is not like the last bear market. Despite claims to the contrary, this time really is different. This time we have monetary officials trying desperately to reign in the inflation dragon they created with a dog leash.
Every day, more and more Americans are waking up and realising their purchasing power is evaporating daily, their lives are becoming increasingly expensive and their hope for a comfortable future is completely out of reach.
When you can’t afford rent and groceries without two jobs, you are certainly not going to be aping into the latest meme coin. Meaning, the only people left in the space right now are the die-hards.
Like a bunch of heroin addicts at the methadone clinic, they’re all standing around, waiting for the door to open so they can get their fix. Unfortunately, they’re all about to find out the clinic is closed until further notice.
Sooner or later the shakes are going to set in.
Conclusion
When is the next bull-run going to start? I’m guessing it’ll probably be a decade or more. I think much like the 1930s, we’ll see some good sized pumps on the way down, but I think it’s down only for a few years from here on out.
Before COVID, I assumed asset prices would rebound when markets tanked and the Fed started easing again. Post-COVID, I think they’ve done too much damage to recover from.
My guess is, a major global conflict comes before the next bull run. In case you were wondering, traditional stocks and real estate still have an actual, fundamental value.
And, in wartime, those things tank like crazy. Crypto has no fundamental value. Bitcoin does have a certain (if not difficult to parse out) network security value.
But, if things with actual value tank, what happens to things that do not? The simple answer is: they zero out.
My suggestion is: don’t hold those things in any meaningful amount. To be fair, they may not tank. They may, contrary to all reason, pump while the world melts down.
I don’t think so, but they might.
Even if we don’t end up in a major global conflict, there is undeniable financial pain coming for Joe and Jane Average. As I’ve said dozens of times, I have a small, swing-traded stake in Bitcoin and a couple of long-shot plays in micro-caps.
I can’t predict the future. No one can. I can see what’s happened in the past and gauge it against where we are now.
That said, gold, silver and swing traded sats are the order of the day for me and in that order specifically, with most in gold and silver.
CrypTwix can call me a boomer. They can call me whatever they will. I’ll be sure to give them a call after the collapse and see how they’re doing in the breadline.
These are just my opinions. I’m not a financial advisor, this isn’t financial advice, and always DYOR. Following any of these ideas might cause you to lose all of your money. I am 100% serious about that. I like tinkering with this stuff, but I’m on record acting like a total baboon. Invest accordingly.
Until next time, be safe, be smart and be sure to tie the camel.
