The road to hell is paved with the words 'It’s different this time'
“The four most dangerous words in investing are: This time it’s different.” – Sir John Templeton
IF you look at the charts of all previous halvings of Bitcoin, they match very closely with each other. This time round there’s a resonance, perhaps, and there is plenty of time to go, but it feels different.
I freely admit I thought some time ago that we would see another massive all time high over the winter, but there are straws in the wind that this might not be so. That said, and I always say it, Bitcoin likes to wrong foot you. All the pundits (who let’s be honest don’t know any more than we do) are forever saying it’s going to break out upwards. As has been said before, they would say that wouldn’t they, as otherwise there is not much point listening to them.
But my view has shifted in so far that one would have to conclude that Bitcoin as an asset is and has matured over the last couple of years. Not least is the arrival of ETFs which bring good old BTC into the ambit of traditional finance, which on its own is a distinct move away from the erstwhile disruption story.
So the new story is more about technological viability, about store of value and real-world integration. You can speculate about BTC becoming a default Treasury asset, but I don’t think I would hold my breath on that one. No government is going to allow something they don’t control to guide them.
Arguably, Bitcoin will start to act like stocks and shares on traditional exchanges. In other words we will see the old well-worn cycles of accumulation, mark-up, distribution and mark-down more evident than the parabolic moves from low to high that have previously manifested in Bitcoin’s life. It is already happening, but my view is that existing commentators, because they are NOT from Tradfi to start with, and have no basic grounding in investment cycles, don’t recognise what is happening.
What this also means is that all the guff about Bitcoin being a hedge against inflation and all sorts of other pie in the sky is effectively dead. It also means there is more reason to compare Bitcoin with Gold as a store of value.
Personally, I don’t like that thought as, to this day, something that can fall 25% overnight is hardly a store of value and more of a casino. But it has other characteristics which mean that Bitcoin and gold resonate with each other. Remember, I was dubious about ETFs for Bitcoin as the whole point of an ETF is a spread of assets to diffuse risk. Holding just Bitcoin is very definitely not doing that.
But I suppose when asset managers that could buy out the US national debt say they want something the powers that be better listen. It’s only about $15 billion after all.
One of the more interesting things is the Bollinger Bands around Bitcoin. In case you don’t know, Bollinger Bands are a technical analysis tool used to track the price and volatility of a financial instrument or commodity over time. They are made up of three lines plotted on a chart: a middle band, an upper band, and a lower band. Gosh! Who would have thought?
Technically, as the price diverges upwards from the middle, the upper line goes geometrically higher. The same in the other direction (OK, I know this is an over simplification). But, as of right now and extending back to the halving nearly five months ago, the bands are telling us Bitcoin is going nowhere until something happens to break the equilibrium.
I’m not a huge fan of technical analysis (it’s used to reinforce a pundit’s view until it doesn’t) but I couldn’t help but be struck by this ongoing snake.
And don’t think the Fed is going to upset any equilibrium. Powell is struggling with many more things than helping crypto investors, not least of which is the addition of $1 trillion (that’s $1,000,000,000,000) every 100 days to the US National Debt. That alone is one of the reasons crypto has a constituency, as you can’t print any more Bitcoin.
The other interesting thing is that, after six years out of crypto, Stripe has announced they are getting back into it. That’s part of the broadening real world utility I was talking about.
It could well be that I will have to eat humble pie in the coming months and, if so, dear reader, you will hear it from me first. But if I were a betting man, which I’m not, I’d start behaving like a traditional money manager...
Sell in May, and go away. Come back in St Leger day.
Which, this year, happens to fall on September 14.
