jacobcanfield
Long

Is $52,000 Bitcoin Possible As a Hedge for Economic Collapse?

BITFINEX:BTCUSD   Bitcoin / U.S. Dollar
Stocks Will Crash and Bitcoin Will Skyrocket as Collapse Hedges.

This is a bold statement, but I am going to make it anyway.

The time frame on this is unclear, but the charts are showing a big move within 12 months.

I hear a lot of people claim that Bitcoin will go to $50,000, and they give a few fundamentals, but I want to show you the technical on why I believe this may be possible.

  • - Arthur Hayes said Bitcoin will go to $50,000 by year end.
    - Jeet Singh of Economic Forum in Davis said $50,00 by end of year.
    - Tim Draper predicted $100k bitcoin in 2018
    - John McAfee said $1,000,000 by end of 2020.

I want to show you my technical reasons why I believe that Bitcoin could make a run for $50,000 and gold has the potential to make a run to $4200/ounce.

That may seem crazy, but it’s not that crazy when see that it’s really only a 700% move from where we are now at $6,600 with some really big news on the horizon from ETF approvals, Bakkt (owners of the NYSE) creating a physically backed bitcoin storage solution and every major banking giant trying to enter the space.

$50,000 is a really important level as well because it would mean that Bitcoin would have a trillion dollar market cap with 21,000,000 Bitcoin total.

For this analysis, we’re going to be referencing two main trading tools commonly seen.

The first is the Fibonacci Extension tool and the 2nd is the RSI .
For this specific analysis, we’re going to be looking at longer time frames of indexes, tech stocks as well as gold and Bitcoin .

Before we get into the analysis too much, I want to explain Fibonacci Numbers.
Fibonacci is a mathematical sequence that an Italian mathematician devised when trying to determine the breeding pattern of rabbits.

Explained very simply, starting with 0 and 1, each new number in the sequence is simply the sum of the two before it.
0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377 . . .

Fibonacci Sequence for Trading

Now that we understand where the sequence comes from, there are also specific things that we use in trading known as the fibonacci retracement tool and the fibonacci extension tool.

The most common numbers that traders are familiar with are .236, .382, .618 and .786.
For the Fibonacci extension tool this is when a price breaks beyond 100% to the upside or downside.
These are the 1.272 (common in forex), 1.618, 2.618, 3.618 and the 4.236.

For my analysis, we are going to break out of the construct of the standard sets of tools that traders use and explore some unknown territory where we get some really interesting results.
I’m not going to do a deep dive into all the mathematics, but I use all of these Fibonacci numbers in one way or another when trading.

Fibonacci extension typically goes to the 4.23 level, however, I am going to debut some new Fibonacci extension numbers beyond the 4.23.

However, I’m going to debut some additional numbers beyond the 4.23 that will hopefully open your eyes to longer term trend analysis not seen anywhere else.

I’m going to call these the Canfield Fibonacci Extensions, because I haven’t found anyone else that has used them and… well, why not?

Use any number after 13 in the sequence to get the following Fibonacci numbers that are beyond 4.23.
• 1.272 = Square Root of 1.618 (SUPER COMMON IN FOREX)
• 1.618 = Golden Ratio = Any number / Prior number in the sequence
• 2.618–1.6182
• 3.618–1.618+2
• 4.236 = Any number in the sequence / 2nd number prior in the sequence
• 4.618 = 1.618+3
• 5.618 = 1.618+4
• 6.854 = Any number in the sequence / 3rd number prior in the sequence
• 11.090 = 1.6185 = Any Number / 4th number prior in the sequence
• 17.944 = 1.6186 = Any Number / 5th number prior in in the sequence
• 29.034 = 1.6187 = Any number /6th number prior in the sequence
• 46.979 = 1.6188 = Any number / 7th number prior in the sequence
• 76.013 = 1.6189 = Any number / 8th number prior in the sequence
• 122.992 = 1.61810 = Any number / 9th number prior in the sequence.

Looking at these Fibonacci extension numbers, we’re going to analyze a LOT of different markets, so I hope you’re ready for this rabbit hole.

First, let’s start off with Bitcoin short term as that’s where a lot of people like to focus their energies.

For Bitcoin to make a bullish move to start this sequence of retesting the upper Fibonacci levels, here is what I want to see:
A confident break of the downtrend at $6900 (which would finally break the .618 retrace that I pointed out in my previous analysis and finally break the $7499 level that we see at the 6.85 Fibonacci level where we got a tweezer top back in late July.

We also want to see a 200 MA break confdiently as well.


On a weekly chart, Bitcoin has been most respectful of the 20MA. This also coincides with our 200MA on the daily, so another one to watch for.


On the 240, Bitcoin is sitting right at the 200MA, so a strong break above that would start to see our bullishness playing out.


If, however, Bitcoin breaks to the downside and breaks $6100 on the weekly and closes, I expect a very bearish break down target of $5400 (if the lower support holds) and $4570 as the 4.23 support that we saw a rejection at in September of 2017.

This is still a very real possibility, so make sure you don’t let your bias blind you into one probability only.

For our long term outlook on Bitcoin and some of our newer Fibonacci levels, we’re going to use the Fibonacci extension tool from the Bitfinex chart from the bottom.

When you’re on the Fibonacci extension tool, make sure you add the numbers that I indicated above.
ADD THE FOLLOWING: 6.85, 11.09, 17.944, 29.034, 49.979, 76.013 and 122.992.

Based on this, our long term chart is showing a clear rejection at the 17.944 fibonacci level

For a long term outlook, and where money would come from to flow back into Bitcoin , we want to look at all of the equities and Gold and the Dollar index .

GOLD MARKET:
The most common hedge has been gold , so I see that Gold could be a great hedge as well in the potential equities crash as the chart is showing a big hidden bullish divergence for a strong move to the upside.

Using a fib extension off of the very first leg from the bottom of the chart, we can see that there was a clear Rejection at 19.944 with support at the 11.09 off the fib extension.


On the weekly time frame, Gold has a massive hidden divergence with the RSI as well as a swing low failure (which is also very bullish on the RSI )
https://www.tradingview.com/chart/6dHL5q...

Upside targets for gold to watch for are $2737/ounce and $4272/ounce based on upper side Fib levels that we've seen other legacy stocks hit.


So if Gold and Bitcoin have big upside potentials, where will the money come from to push them to new highs.
If we look at longer term time frames like weekly and monthly, we can see that many of the biggest stocks and indexes in the US markets are ripe for big corrections.

With growing government debt and a potential rate hike increase from the Fed, we are in serious waters with a potential global equities collapse.

Even the IMF has been warning of a potential economic collapse.
So for leading tech stocks, I’m going to use the same Fibonacci extension tool that I used on Bitcoin and Gold with even higher Fibonacci levels added onto it like I showed you how to calculate.

LEADING STOCKS:
AMZN
Long Term Chart with a Fibonacci extension showing it’s also at the 17.944 like Bitcoin and Gold where they were massively rejected:

On a shorter term time frame, we can see Amazon fell out of a rising channel and was rejected on the retest with a falling RSI .


Apple Bearish Divergence with a rejection at the 46.979 fibonacci level.


On a Fibonacci extension from the bottom, it takes Apple to the 46.979 level. (notice it was previously rejected at the 17.944 and found support at the 11.09 (where gold is currently being supported.)


IBM is interesting because it’s actually in the same place that Gold is. It was rejected off the 17.944 and has found support on the 11.09 level and isn’t showing the same types of divergences as the first two.


Berkshire Hathaway is showing a bearish divergence on the weekly as well as potential strong rejection at the 6.854 Fibonacci level.


INDEXES ARE LOOKING MASSIVELY BEARISH ON WEEKLY TIME FRAMES:
Dow Jones Industrial Average –
There is a massive bearish divergence on the weekly with a swing high failure and a double top at the major Fibonacci level.


Dow Jones 76.013 Fib rejection.


Short term Dow Jones shows a massive bearish divergence on the weekly with a swing high failure rejection on the RSI .


SPY Index
SPY – Has had a clear 2.618 rejection with strong bearish divergence on the weekly and another swing high failure.


What about currencies?
Is the dollar currency index the leading indicator after showing a similar set up with a bearish divergence and a swing high failure with RSI on the weekly chart from late 2016?

Instead of going through each and every currency, I’m just going to use the US Dollar Index, which is a weighted geometric mean of the dollar's value relative to following select currencies:
Euro (EUR), 57.6% weight
Japanese yen (JPY) 13.6% weight
Pound sterling (GBP), 11.9% weight
• Canadian dollar (CAD), 9.1% weight
Swedish krona ( SEK ), 4.2% weight
Swiss franc (CHF) 3.6% weight

On the DXY US Dollar Index , we can see a strong bearish divergence with a swing high failure and rejection at .618. On the weekly chart with a failure to break the .5 as well as a failure to break the 70 on the RSI twice, which could mean we’re moving into a bear market. It’s found a little support off of the previous resistance line, but not much.


Based on ALL of that, my prediction is that the rising government debt levels and the interest rate hike will trigger a massive financial crisis that will effect the Dow Jones, leading tech stocks and many other things I haven’t covered.

It’s not 100% that Bitcoin or gold will be the hedge as often times we see the Chinese Yen take that prominent spot during big US recessions.

Most people think that Bitcoin is a very speculative market and that if we did see a collapse like I'm talking about, people would flee to cash and the US dollar .
While this may be very true, there are talks between Russia and China where they are transacting without the use of the dollar, which is very bearish for our fragile fiat because the only thing propping it up is our military and the fact that oil is pegged to the dollar.

I think that Bitcoin will be the hedge because of the flight to to Bitcoin we've seen with other countries that have destabilized and saw their currencies become completely worthless. The volumes of Venezuelans buying Bitcoin are through the roof right now. We are seeing signs everywhere that many other countries will be following the path of Venezuela and this is why I think that Bitcoin could be that hedge.

Due to the trade tensions with China, I believe that we may see the Yen go down with the dollar as well.

I have hedges and strategies for a lot of these scenarios and outcomes, but I wanted to share this with all of you so you can prepare yourselves as well in case what I see may come to fruition.

The time frame has yet to be determined, but I would estimate within 6-12 months, you will start seeing a lot of the divergences come into play and start seeing pullbacks like we saw with Tesla and Facebook .

I hope you enjoyed my analysis and would love to hear your comments and your own analysis.
Comment: I'm wondering if Tesla was the first in the stock market to tumble following the same weekly bearish divergence pattern I'm seeing on all these other charts.

What would a 40% drop in Dow Jones look like?

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HMMMM...the fibo thing would be quite original relating to BTC if @cryptoicasso (who your a follower of i believe) had not have mentioned it months and months ago,
+1 Reply
@DC618, I actually had to look to see what you were talking about.

His fibs are nothing like mine. He just did fibs correlated to numbers IN the fibonacci sequence.

Mine are extensions beyond the 4.23 using a similar division correlation that I highlighted in my write-up.

Here are his fibs: https://twitter.com/cryptopicasso/status/1042554270577356802

As you can see, they are 1, 3, 5, 8, 13, 21, 34, 55, 89 and 144.

Mine are: 6.85, 11.9, 17.94, 76.03 and 122.

These are very different and I've applied them to many different charts, all of which are now proving to be true.
Reply
great work. thx for your thorough analysis.
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Finally someone whose analysis takes into account the very real threat of a new global financial crisis. In my opinion the collapse of the global debt bubble has already started the moment the Fed began hiking intertest rates. Most EMs which have benefited from low interest dollar investments during the past 10 years are already experiencing a massive outflow of capital due to investors cashing out in order to pay back their dollar denominated credits due to Fed tightening. Unfortunately, while the global economy is still afloat the Fed's rate hikes are synonymus with a stronger dollar which means massive downward pressure on crypto/dollar pairs without new capital inflows. It's only a matter of time, though, before most pumped up markets collapse under those higher interest rates. When this happens we will witness a crisis far bigger than 2008. Everyone will run to the exits causing a liquidity crisis for the dollar and other major currencies. This will put further downward pressure on asset prices. However, this will result in good buying opportunities for cryptos. I'm convinced bitcoin will experience massive inflows in capital once the crisis is in full progress. Just like gold and silver the increased demand is more than likely going to make up for the deflationary forces of a crisis. Even if the price might sink in real terms the purchasing power will most definitely increase.
+2 Reply
Well done! A review of the values of 143 global currencies indicates that so far this year, more than 80 percent have fallen in value. There have been outsized declines in countries like Venezuela (down 99 percent), Argentina (53 percent) and Turkey (38 percent). However, Brazil is down 20 percent, Russia 15 percent, India 11 percent, Sweden 10 percent, and the Philippines 8 percent. Big economies like China are experiencing a 5 percent currency value decline while the Euro is off by 3 percent. Using sources like the World Bank, the IMF and Wikipedia, one is able to develop a rough estimate of the external debt of 205 countries. If the estimates are correct, these countries owe $76.9 trillion in dollar terms. A 1 percent increase in the cost of debt globally would result in a need to increase interest payments by $769 billion dollars. A 2 percent increase, which is close to what has been the rise in the effective Fe Funds rate, if spread globally, would force nations to increase their payments by $1.5 trillion. 2 weeks ago, when the Fed most recently raised rates, it set the repo rate at 2% and the interest on excess reserves at 2.25%, the highest range in more than a decade. The effective fed funds rate, which is what banks use to lend to one another, would now float between a target range of 2% and 2.25%. (In 2019 there are more interest rate increases planned) This will be one of the most brutal ends of a cycle ever experienced. More likely much worse than the 1929 crisis.
+2 Reply
themaniac3010 pmeventures
@pmeventures, In my opinion the collapse of the global debt bubble has already started the moment the Fed began hiking intertest rates. Most EMs which have benefited from low interest dollar investments during the past 10 years are already experiencing a massive outflow of capital due to investors cashing out in order to pay back their dollar denominated credits. Unfortunately, while the global economy is still afloat the Fed's rate hikes are synonymus with a stronger dollar which means massive downward pressure on crypto/dollar pairs without new capital inflows. It's only a matter of time, though, before most pumped up markets collapse under those higher interest rates. When this happens we will witness a crisis far bigger than 2008. Everyone will run to the exits causing a liquidity crisis for the dollar and other major currencies. This will put further downward pressure on asset prices. However, this will result in good buying opportunities for cryptos. I'm convinced bitcoin will experience massive inflows in capital once the crisis is in full progress. Just like gold and silver the increased demand is more than likely going to make up for the deflationary forces of a crisis. Even if the price might sink in real terms the purchasing power will most definitely increase.
+1 Reply
I like your analysis and appreciate all the hard work you've put into it. I was playing around with additional fibonacci extensions ratios to analyse longer term trends in bitcoin too, a few months ago. It's nice to know that someone else had the same idea.
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Nice charting and hard work!
Also, very nice find that curve support on the weekly time frame!
All the best!
+1 Reply
BTC is dead, with BTC growing in popularity mainly due to criminal activity and media hype, both of which has become almost non-existent, bitcoin only has one direction of movement, and that's down. The only thing keeping bitcoin at it's current consolidation level is the fact that you need bitcoin to pretty much buy other cryptocurrencies, which are also pretty much in decline.
Reply
cryptodiggy kieronwiltshire
@kieronwiltshire, you dont know what youre talking about
Reply
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