Bitcoin New Market will Appear in September, But Why?
Everything has a crack, that is where the light comes in.
Several chaotic events happened last week. Bitcoin market’s fluctuation made everyone confused. As I mentioned in the previous article “Why Bitcoin price has not plunged yet”, the rise of bitcoin market will not come until the 1st August. Unexpectedly, a new round of bitcoin price skyrocketing began when the United States announced interest rate cuts.
U.S interest rate cut is what most people concern the most about. However, the result is within expectation. Bitcoin market foresaw the consequence, and it adjusted the price prior to the announcement. Under past circumstances, such a big issue will lead to the rise of US stock price, and fall of gold price. However, US stock price surprisingly plummeted, while gold and bitcoin price surged.
The reality shows that the market gets more pessimistic. The core element is, as I mentioned in the previous article — Trump and the Federal Reserve pursue two completely different objects. Trump aims to win the next election. Therefore, he must ensure the sustainable development of U.S economy before the 2020 election. In the past six months, Trump has tweeted to add pressure on the chair of Federal Reserve Jerome Powell. He criticized Fed. For raising interest rates too fast last year by too much. Trump reiterated his insists in most recent tweets that the U.S economy will get stronger if the US central bank cuts interest rates.
However, Powell is very clear about the fact that, Trump’s decision only benefits himself. At this age, Powell prefers to consider long-term benefits. As a result, they held the disagreement for quite a long time. “I didn’t ever threaten to demote him,” the president told NBC’s Meet the Press in an interview broadcast. Trump said: “Well, I’d be able to do that if I wanted but I haven’t suggested that.” It actually indicates that if Powell objects Trump’s decisions, Trump can let him go.
If that being the case, why stagflation came after bitcoin price skyrocketed since August 1? Here is a very critical signal. To understand better, let’s trace back to what happened in the past two weeks.
Sino-US negotiations
At 1:30 am on August 2, Beijing time, Trump surprisingly announced that the U.S will impose a further 10% tariff on China’s remaining $300 billion goods from September 1. The whole world was in shock. Then financial market gave the most direct response. International oil price plunged by 8%, the biggest drop since the oil price crash occurred in 2015. The Dow Jones index decreased by nearly 600 points. The offshore CNY exchange rate fell by almost 700 points, and the 10-year US Treasury bonds yield dropped to its lowest level since 2016.
Big investors accused Trump for breaking promises, which repetitively affected global finance market, especially the bitcoin market. While I can understand their complaints, I think they mistargeted the object to blame. Let’s rethink about the details of what happened. The whole world is a trap. We must figure out who set the rule of the game, to understand the rise and fall of investment products.
At 16:30 pm on August 1st, Beijing time, before Trump leaving the White House for Cincinnati to participate in the campaign rally, he made a clear statement for his stance on Hong Kong issue: “Hong Kong is part of China. Any HK issue must be handled within China without any interferences. “ However, as we all know, the fact is US Secretary of State Mike Pompeo and others have made totally different statements to interfere with China’s internal affairs. In addition, on the 1st August, the US Senator and the “anti-China pioneer” Rubio issued an open letter, adding pressure for Trump to deal with Hong Kong affairs.
You may feel a bit confused. Does Trump have a split personality? In fact, time already revealed the answer: China’s high-level meeting was held on July 30th. Since everyone knows that the Federal Reserve will announce the interest rates adjustment on August 1, why the government did not wait until then to hold the meeting? The only reason is: the answer is already known before the story even begins.
The data in July showed that the U.S economy was quite unpromising. The economy continues deteriorating: the US production index in July fell for the third time in four months, pushing the manufacturing employment index down to its lowest level since November 2016. The manufacturing index fell to 51.2 from 51.7 in June, and export indicators continues to fall to the lowest level since February 2016.
If Trump wishes to win the 2020 election, what’s his strategies? The 1st thing is to keep U.S economy and U.S stocks rising. The target of Trump’s $300 billion tariffs increase was not China, but rather the Federal Reserve. His purpose is quite obvious: to use US stocks plummet to prevent Powell from opposing against him. After all, the consequence of 300 billion yuan of tariffs will transit to every Americans, and the inflation problem needs to be solved by the Fed. As expected, he U.S stock market fell. But why did he choose 1:30 am on August 2, Beijing time to announce the tariff increase?
Why the goal is not China? Otherwise he should announce it half an hour before the opening of the A-share market. The explanation Powell gave on the 1st August was as follows: “The purpose is not what we think it is.” It actually aims at “preventing decline risks” rather than imply that monetary policy has since opened a loose cycle. We believe that it is essentially a reasonable policy adjustment within the cycle to a more easing policy.” Powell reiterated that, “We might raise the interest rates again in future. We will use all the tools we have if necessary.”
The most important thing Powell said is that: we will never consider political factors, and we will not implement policies to prove our independence. This completely annoyed Trump as against his will. Therefore, Trump increased tax to cause the plummet of U.S stocks. Trump needs to make sure Fed will cut interest rates to stabilize the US economy until he succeeds in the next re-election. For him, it doesn’t matter how the Fed will solve the US economic problems after the global economic collapses, and Powell is doomed to be a scapegoat.
Therefore, according to the Fed’s observation tool of the Chicago Mercantile Exchange (CME), traders predicted the possibility of the next interest rates cut on September 18 to be 100%. Fed funds futures indicated a 16.5% likelihood of a 50-basis point cut.
Continued interest rate cuts will transmit the panic signal to the global market. As for Bitcoin, it is a convenient tool to help capitalists transfer huge assets.
I have said earlier that bitcoin cannot be manipulated by the minority in the digital currency world. Instead, it is a part of the global financial market. Although bitcoin leads the digital currencies, it is still emergent in global financial market.
What’s your point of view towards the bitcoin market fluctuation since the beginning of this year? As the only king of digital currency, bitcoin price always rise prior to other currencies. If the price of other mainstream currencies rise first, bitcoin market will fall in opposition. From the past experience, we have realized that all the mainstream currencies follow the trend of bitcoin.
Before the traditional finance steps in, experienced cryptocurrency investors dominated the market, as compared to normal personal investors. However, things are different when Wall Street institutional investors comes with tens of billions of dollars. In the world of traditional capitals, digital currency market is still immature. It should be easy to figure out who will be the final winner.
Wall Street first educated the global digital currency community members, but their goal was not to gain small profits from the leeks. They are waiting to set up a bigger trap. As I said in my previous article, “The logic behind Sino-US trade War and the Rise of the Digital Currency,”: currently only three things are left to compete in mid-battlefield, CNY, USD, and bitcoin. Bitcoin is expecting the key signals from traditional financial market.
This signal is Sino-U.S September negotiations.
Let’s look at the July 30–31 negotiation details reported by Xinhua News Agency: U.S Trade negotiator Wright Heze and Treasury Secretary Steven Mnuchin shook hands with Chinese Vice Premier Liu He on the morning of July 31. Then the officials had a four-hour closed-door talk. “It was relatively brief,” after that the officials went out to take a group photo “40 minutes earlier than expected.” In the end, “US trade officials left for the airport without responding to reporters.”
The most important information is: “ The two parties will hold the next round of high-level economic and trade consultations in the United States in September.”
Actually, the top-level talking is already finished. The next step is to deal with separate affairs. On August 2, the United States announced new tariffs on another $300 billion worth of Chinese imports following stalled negotiations. China quickly responded: On August 5, Chinese currency trade against U.S. dollar broke 7 regarding onshore and offshore trade since 2008.
We must know that in October last year, China carried out a battle called “defend CNY to the USD at 7”. To relieve the pressure by Trump’s $200 billion tariff, China calmly kept USD/CNY at “7”, therefore most people “misunderstood” the critical influence of 7. As mentioned above, the target of 300 billion sanction was not China, but China is able to bear the pressure regardless. What’s point of making such a move at this point?
There is only one answer: to test the depth of water
Inverted U.S Treasury bond yields
Historically, the inverted U.S bond yields have been regarded as the leading indicator of the economic recession. The current inversion has intensified, and the U.S stocks have experienced a sharp correction as predicted. In addition, the Fed’s two actions are also in line with the pre-recession features: the end of interest rate hikes and interest rate cuts.
In May 1989, the United States long-term and short-term government bond spreads was inverted, followed by economic recession. U.S didn’t walk out of crisis until 1992. In the first half of 2000, the U.S economy was relatively stable. The year-on-year growth rate of GDP was higher than that of the previous period. Although the manufacturing and non-manufacturing PMIs were significantly higher than the 50-point mark, they showed a downward trend. With the inverted term spread, and the burst of “Internet bubble”, the U.S economy gradually shifted to “recession” period. As the manufacturing PMI fell below 50-point mark in August 2000, the economy entered a new round of recession. During the period, the stock market kept falling. On the eve of the “9.11” incident, the Nasdaq index plummeted by 31%.
The most recent round of inverted pre-recession spreads occurred between 2006 and 2007, with an extensive time span. The subprime mortgage crisis broke out in 2008 shortly after the inversion greatly damaged international financial order, and it caused a strong credit crunch effect in the financial market. Hence, the long-term systematic financial risks accumulated by the international financial system were exposed.
The inverted long-term and short-term U.S bond yields reflect the pessimistic market attitudes towards long-term economic inflation. The inverted yield curve will not directly lead to a recession, but it greatly impacts market sentiment. People tend to change their behavior patterns after seeing this dangerous signal.
The most influential one is the inverted 3-month and 10-year US Treasury bond yields, which were core symbols of the next economic recession. The past statistics tells that, after the first inversion, an economic crisis will normally occur within 13.8 months. The longest interval will be 20 months.
On March 22nd this year, for the first time, the U.S government securities inverted. It has been on-going for four months to reach the current point. This means that there’s 50% possibility for the next global financial crisis to come in May 2020, and by the latest, the end of November 2020.
Judging from the past Fed’s interest rate changes, there’ll be less space for interest rate cuts in future. Kyle Bass, the well-known hedge fund manager in the United States, bet that U.S interest rates will drop sharply to near-zero level next year. If the U.S falls into the economic recession, the Fed will be forced into a crisis mode.
The winter is coming. This is likely to be the biggest economic depression in human history throughout the past 100 years. Everyone will be affected.
2020
No one will object the fact that, at present, the world’s two biggest bubbles are U.S stocks and Chinese real estate industry.
The U.S stock market is facing the dual pressures of the U.S and the global economic downturn and Trump’s re-election. U.S economic collapse is an inevitable result. The question is, when to collapse will be the most effective? This also affects the battle between Trump and Powell. On the other hand, how will the Sino-U.S competition and the global financial cycle help preserve China’s victory and overtake the United States?
Most people might have heard the cycling movie called “To the Fore”. In cycling competitions, a team member called “windbreaker” is responsible for absorbing the air resistance in the front and creates the favorable conditions for the final sprint. U.S is now the “windbreaker” to create great conditions for China to develop.
USD/CNY breaking 7 signaled Wall Street’s declaration of sovereignty in Bitcoin. It is a psychological hint to the traditional financial capital world, to iterate who will become the new boss. Behind it, we need to understand that China’s real estate market will encounter tremendous pressure, which is why China’s high-level meeting repeatedly mentioned that real estate will not become a lever for short-term economic adjustment. This is like a vaccination to remind you that financial crisis will definitely come. If China wants to sustain economic devel0pment and succeed in the Sino-US competition, it needs to actively break down the economic bubble.
If I am correct, in the next year or year and a half, when the U.S stock market crashes, China will immediately launch a property tax. Proactively reduce the pressure is always better than passively wait for the risks.
Before every financial crisis will be clear signals and black swan events.
Today we saw the competition between the first echelon China and the United States, the second echelon between Japan and South Korea’s confrontation, as well as the confrontation between Britain and Europe, and the no-deal Brexit initiated by the new UK prime minister. The third echelon will be the provocation between India and Pakistan. The world will be in chaos in the next year and a half.
The typical sign of the 2008 global financial crisis is obvious: 14 months after the US treasury bond was inverted, the U.S subprime mortgage crisis broke out in October 2007, which triggered the crash of U.S stock market. In October 2008, the black swan event of Iceland national bankruptcy caused a further plunge of the global financial market. After that, the Greek government declared bankruptcy, which triggered the Euro crisis. Just as the spreading out of ripples, global financial assets and game rules are being reset.
This round of financial depression will influence three nations — South Korea, Singapore and New Zealand. Three countries share a typical feature, that is, they chose the wrong side between China and the United States. While on the other hand, Indians are celebrating for Rupee’s rising value. However, whether the 1997 financial turmoil in Thailand will happen in future India? I’m not sure.
What will be the biggest black swan in 2020? Actually, the answer is clear. It will be Taiwan Strait issue.
Is Hong Kong helping to solve the local issues? The one country, two system policy actually means that one country is the prerequisite of two systems. Therefore, solution is an internal issue. It indicates that all the farce we have witnessed actually point to the real problem. They have written a complete script for us to see the play.
Hong Kong issue exposed three facts. First, domestic citizens see the advanced Chinese political system. Secondly, the foreign government kept silent under the pressure of foreign public opinions. Thirdly, it sets a good sample for Hong Kong’s neighbour. If anyone would like to abandon one country, two systems, there’ll be only one answer — one country. This is likely to be the next black swan event in 2020. “Attack him when he is unprepared, appear where you are not expected” is the true art of war.
After this campaign, in just one month, the real estate transaction volume in Hong Kong plummeted by 40%, but the housing price dropped by 20%. Now you understand why CNY will take the initiative to break 7.
However, such a drastic change is bound to be accompanied by a huge concussion in the global financial market. What’s the key solution?
Bitcoin
Let’s get back to the beginning of the article, the future trend of Bitcoin market that everyone cares about. In fact, the script is known to all. If we trace back to the past events, we can see the future trend of Bitcoin. If you still don’t understand it, let me remind you.
Those who set the game rule is clear about what will happen in the next year and a half. The Sino-US negotiation in September will be an important opportunity. As I mentioned earlier, the fluctuation f bitcoin market in the past six months has well educated the market follow its trend and get prepared for the second half of the year.
The reason for market to follow Bitcoin trend is that the market value of Bitcoin has accounted for 70% of the digital currency market.
When the market has reached consensus on bitcoin, the next step will be price surge. After the September battle, bitcoin is likely to reach the previous high point of 1989 in October. It’s most likely that the new high point of 22,000 will be reached before the end of the year. Why Bitcoin is likely to break the previous record? It’s related with the opening of Bakkt exchange.
We should look at things reversely. The opening of Bakkt exchange is not the reason for the rise of bitcoin market. But rather a tool used by Wall Street traders to manipulate the bitcoin market.
If I am a big investor of bitcoin Wall Street, by this time, I should have already set up the game. Why? Let’s briefly overview the current global situations. The Sino-US competition and the chaotic world situation has paved the road for bitcoin rise. The opening of the Bakkt exchange announced to the world that bitcoin is “digital gold.” Purchase gold in financial chaos to avoid risks is the golden rule. As an investor, all I need to do is pull the price of bitcoin price to show my power to the whole traditional capital market.
Why can I control the market? Since I took time to educate the market in the first half of 2019, and developed their faith in cryptocurrencies. When will the market start to rise? I believe the most suitable timing is from 2020 New Year’s Day to January 24th Chinese New Year’s Eve, in order to defeat the enemy when it gets relaxed. Hence, the world will only see one bitcoin story: the skyrocket of bitcoin price when the next bitcoin halving cycle begins. The next round of having will happen around May 20, 2020.
But be cautious. Countless small investors will face huge loss during the next bitcoin halving in 2020.
Let’s rethink about the inverted U.S Treasury bonds. If calculating from 22nd March, 2019, it will be 13.8 months by May 20, 2020. If I were a Wall Street lead investor, I will be happy to see the plot goes as I expected. Newbie investors will end up being harvested like a sheep. If you think it’s impossible to happen, just wait and see whether bitcoin price will surge to $330,000 before the halving cycle in May 2020?
How many people entered cryptocurrency market because they lack confidence in traditional market? Global financial crisis also triggered bitcoin’s popularity. But please remember that the FOMO occurred at the end of 2017 was based on the same logic. The next round of global financial crisis is approaching, and bitcoin market is expected to keep rising. However, there’s one question, why 2018 ended up with bear market?
If global financial tsunami will occur, especially for an unprecedentedly long recession cycle, people will sell speculative assets even investments to protect personal assets in the first place. To give a simplest example, if you have 1 million yuan, you used 500,000 to buy a house and the rest 500,000 to purchase bitcoin. Unfortunately, the great depression caused two assets to plummet more than 50%. What will you do? Will you sell the house to buy more bitcoin or sell bitcoin to pay back mortgage? I believe the latter one will be the most common and realistic choice.
So, the question is, if the US stock market crashes in May 2020, how would you solve the problem if you were Trump? By that time, further interest rate cuts or trade war will be less effective, and the fight with small countries will be unable to guarantee his success in re-election. In this case, targeting the pain point of the most powerful rival will be the most effective solution.
Therefore, I believe the Taiwan Strait issue will be the most influential factor of Bitcoin price in 2020.
War triggers the emotions of the American people. Trump’s long-term preparation aims at mobilizing the ethnic sentiments of the white race at a critical moment for a successful re-election result. Thus, the most likely time for the event to happen is between 2020 bitcoin halving and US election. While in the previous year, USD/CNY broke 7 on 19th August was an overture for the moment.
In terms of the longest period for the inverted yield curve. The bottom will come during the November 2020 US election. Regardless of whether Trump will win or not, the global financial tsunami will overwhelm the world, and by that time, nothing will stop the course of history.
As for Bitcoin, it is most likely to return to the original price at the beginning of 2020 by the end of 2020. However, as compared to the financial disaster, it no longer matters. Rather, “Digital Gold” will be deeply rooted in people’s mind. In 2021, Bitcoin will officially become a new force in the global financial market to change the global financial landscape.
By that time, Wall Street and the global capital market will start to seek for “digital silver.”
Recently, a lot of people questioned me for my previous view point: you said Ethereum is the “digital silver”, but why the price difference between Ethereum and Bitcoin kept decreasing?
Ethereum is indeed “digital silver”, but BTC/ETH price ratio is also descending. What is the cause of the problem? I found the answer in bitcoin. The capital of traditional institutions is controlling the bitcoin market. However, they have not yet realized that Ethereum is “digital silver”. Instead, they regard ETH as “digital oil”, the same concept of “Gas” as used by Ethereum. Thus, the consensus of “Digital Silver” is still under-formed in the digital currency market. Precisely at this point, the price ratio between gold and oil is enlarged.
By the end of the 2020 and the beginning of 2021, during the last stage of Ethereum POS upgrade, the traditional capital of Wall Street will finally realize the value of Ethereum.
Future
As I mentioned previously in “An article to understand 2019”, China will not fall behind in the battle between digital currency and blockchain. This will be one of the most critical sign for China to surpass the development of the United States. The news of digital currency to be issued by the Chinese central bank was heatedly discussed by everyone, which is also a sign of for Chinese government to officially enter the blockchain world.
The final confirmation of “Digital Gold” and “Digital Silver” will lead to the next consensus of “digital assets” such as “Digital copper”. As the key indicator of global economic trend, copper has the most extensive application scenarios and use values. After fully understanding the value of Bitcoin and Ethereum, Wall Street will easy to form consensus over other digital currencies.
By that time, I believe Hyperion HYN will come to the fore by entering the vision of global traditional financial capital, and own the power to change the world.
