In the era of quantitative easing, no deep bearish market is supported
I. Recall your panic
Only two months has passed since the China’s crackdown on crypto mining(May 19) and cryptocurrency great sell-off, but for many investors, it seems that two years have elapsed. The BTC price dropped by 56% from its peak($65,000 to $28,600), especially the continuing slight declines from June 30 to July 20, which destroyed most investors’ confidence. Rumors like “The bear market will last for 2 years” spread widely, plunging small investors into great panic to sell their bitcoins. Do you still remember the feeling on July 20 when BTC price fell below $30,000? Please review that feeling because it will be a valuable lesson for you.
II. I don’t believe the eternal bull run
I’m not always bullish, for example, I never claimed a bull run in 2018, instead, I specifically predicted that there would be a bear market from June 2019 until the end of that year. I used to predict:
“If you ask me what is the macro top in 2019, that was the peak at $14,000 which has passed. The BTC price will probably drop in the second half of year 2019 and may start rising up at the end of 2019 or probably in the early 2020.”
It turned out that BTC price stopped falling on January 3, 2020, exactly like I predicted. This would be a textbook prediction if we remove the unexpected events caused by the COVID-19 (March 12 big sell-off).
My confidence, as I have repeated many times, is that: “ the simplest truths are the most reliable ones”. There is only one principal in my investment logic: Central Banks will print money without limits.
III. Cryptocurrencies will end the era of unanchored money printing
The ultimate vision of cryptocurrency is not about going up, up and up, but to end the era of unanchored money printing (the central banks print money from the thin air).
Many people take the Credit based Fiat Monetary System for granted, but in fact, it has only 47-year history since the end of Bretton Woods system in 1974 (withdrawal of convertibility of gold into dollars ) and now unanchored money printing system is seriously ill, thus bringing out a strange doctrine as “Modern Money Theory (MMT)”.
MMT is the final madness of the era of unanchored money printing, which advocates:
What is legal tender? It is a number that the government can add at will and with which to regulate the economy.
Does the government have to pay back the money it borrowed? No need, just print more money.
Just like Yin is originated from Yang, since the birth of “central banking”, the associated “central bank arbitrage science” emerges, that can be described as: Constructing a housing mortgage-centric asset package.
Note that it is “mortgage-centric” but not “property-centric”. It means if you have a house, the house price will increase 5 times in 10 years, does your wealth increase? Not really, you still have one house becoming old and obsolete. It is not the house price that has gone up, but the legal tender that has depreciated against the house.
If you buy a house with $3 million down payment and borrow a loan of $7 million, your net asset is 0.3 houses. After 10 years, the price of the house increases from 10 million to 50 million and the loan increases from 7 million to 12 million (principal plus 5 million interest), at that time your net worth will increase to 0.76 houses. That is the real increase in wealth.
It’s really ironic that debt has even become a core asset in the era of unanchored money printing.
IV. Several conditions after the sell-off on May 19th
First, I repeat my opinion: The BTC price in the short term depends on luck, while in long term depends on the number of users.
It is hard to predict the trend within 3 months or even 6 months, only yearly trend can be predicted.
I have drawn several BTC price as follows and they were compared with the current trend:
1. The trend after March 12, 2020 and September 4, 2017,
Short-term unexpected events led to a plunge of BTC, then a quick recovery.
2. The market was on a roller coaster ride after June 2019, double-headed bull run after April 2013
After a large drop in BTC price, the bull market emerged again breaking the previous ATH, which can be seen in the image.
3. The deep Bear market in 2014 and 2018
We can see the first scenario (september 4th and March 12th event) is overdue and the probability of the third one(1.5 to 2 years’ deep bear market) is low, because:
a. The growth times after breaking the previous ATH are not sufficient
The 2014 and 2018 deep bear market are based on the premise that after breaking the previous ATH, the BTC price rose by 36 times (2013 bull market: $32 to $1,163) and by 17 times (2017 bull market: $1,163 to $19,666)respectly . Using the analogy of an army’s attack and defense, it means that the attacking side (long-buyers) marched far from its base, so when the army is puched back after having reached its peak, it will collapse.
And this time, the attacking side (long-buyers) marched only 3.3 times away from its starting position($65K over $20K), so when it was pushed back, it showed a strong resistance, the best example is that, on July 20 when short-sellers took actions to finally push the price below $30K, many investors thought that there would be no support until $25K or even $20K.
However, after the $30K , not to mention $20,000 or 25,000, the short-sellers failed to break the $29.5K support. In fact, the lines of defense have been consolidated below $30K, the short-sellers’ moral collapsed and the BTC price was pushed back to $40K.
b.The duration of this bull run after breaking the previous ATH is too short
The decade of Bitcoin is made up of increasing users and rising BTC prices. Usually, a break in the pre-high point of the cryptocurrency price generates a lot of news, and most of the increase in investors emerges in the period after the break.
Bitcoin investors tend to enter in alternate rounds, for example, a person may have known about Bitcoin through flooded news when the BTC price peaked in 2013, but with most people’s perception, the first impression is that Bitcoin is a Ponzi scheme, a bubble or speculation. These people didn’t change their attitudes until 2017 when bitcoin broke it ATH again: Huh? Bitcoin is still alive? And it’s actually gone up that much? It’s not a scam? Then they may invest. This process shows that investors have been convinced by the rising.
So, the break of the previous ATH will produce a continuous media outreach and inspire new investors and funds, and this time, the ATH break spreads in an unprecedente wide range, not only appealing to individual investors, but also attracting regulatory authorities and institutions in various countries like Grayscale , technology giants like Tesla, and even sovereign countries such as El Salvador.
With such level of media dissemination and capital entering, instead, the bull run lasted even shorter than before, only 4.5 months (previously averaging 9.5 months), it did not make sense in any way.
V. Double Pump Market in 2013
If we analyse the two remaining possibilities (Highly fluctuated Market after June 2019, and Double Pump Market after April 2013), I believe a Double Pump Market is more likely to take place (similar to the trend after April 2013), considering the position of the halving, the bull cycle and the similar timing of the cycle.
I predict that BTC will reach $150K to $300K by the end of 2021, good luck!