Currency, cycles and money flow

Currency, cycles and money flow

Currency is a system for flowing of money – According to the Oxford English dictionary, it is paper and coins in circulation and whilst all currency is money not all money is currency.
Actually, derived from the old French language “Corant” meaning running, eager, swift, lively. And this is from the Latin “currere” to run or move quickly.

So, by sheer definition Bitcoin and Crypto is exactly that. However, as majority of the HODLer mentality in the market – the desire and the WANT is not enough for the price to attack 100k, 200k or a million a bitcoin without understanding the economics even in its simple form.
Money circulation is what makes the world go around – an economy can only flourish if the money flow is constant. This is also true for the crypto market. And this is where the cycles come into the formula. You see, money is different than gold which is different to majority of other commodities. Going back hundreds of years we had barter systems where items where simply swapped for other items. But as civilisations seemingly advanced, we needed a store of value that would not rot, whither or die and this is why Gold was “a safe” value in exchange for items people would barter for.

Skip forward a few hundred years -- we have seen corruption and greed de-value gold, not in its physical form but in its inherent principles. You only need to rummage through Pandora papers or the Panama to get a feeling of money flow. The issue here is whilst majority of us here with access to the internet and a roof over your head would be regarded as first world poor. The majority of the less fortunate would fall into the category of third world poor. (in comparison to the levels of wealth, leaked in the papers above).

The influential and ultra-high net worth’s can sit out a recession and buy the dip. But for the first world poor they are often the guys selling at the discount and often buying at a premium. It is all a flow of money, and this creates the money flow cycle. Such cycles have been dissected by the likes of Elliott, who introduced the Elliott wave theory. See the link for info on this topic.

So why does this matter? Why will this be no different – although majority of the linear thinking believe in their heart of hearts that “it’s different this time”
The reason – is that linear thinkers want the buy and hold strategy to turn a small amount of capital into millions or billions. The idea is no different than placing gold coins and piles of cash under your bed. Without money flowing in and out of the system – there needs to be a constant flow of new buyers and someone willing to sell to these buyers.
Velocity of money is key! For this we need industry adoption, and the best way to drive that is to reduce fees and make the technologies more available. So whilst ‘Diamond hand’ mentality seems logical, it’s also a speed bump in the way to true trajectory in the under pinning value.

In the recent rally we saw very little volume come into the move up, the price was above 50k before seeing any kind of regular volume (not high volume). We broke to a new ATH and yet failed to stay there for more than a day. This is still concerning for the larger picture – when highs are broken, you should expect momentum and a follow through.

The more under the mattress – the more the velocity we achieve.

Now here’s where it still feels a little premature to celebrate moon calls to a $1m a coin level. Take a look at the COT leveraged funds information;
These guys are not getting REKT – these guys are selling low volume to the retail crowd.

I said about the cycles; I have covered this in several posts – here again is the roadmap I painted in March this year. And so far, we have not really deviated from the trajectory.

Here is the post

And here’s the current situation;

Similarly, for the “they blew up the rocket call”

So, I cannot ignore the cycles, the lack of velocity and of course the money flow itself. Renowned economist John Maynard Keynes popularised the shift of paradox – which stated individuals tried to save more during a recession which leads to a fall in aggregate demand, in turn effecting the economic growth. For an economy to grow it needs to flow.

This flow is what cause the cycles.

I recently read the book “the chimp paradox” how it simplified human logic into 3 categories – we are chimps, human or a computer. When fear and greed take over, we often use our chimp brain to assess the situation and all rational goes out the window. We only agree with our own beliefs and dismiss all other points of view, regardless of the logic and empathy behind it.

When money stands still, it is no longer money. This is why saving, storing hoarding will never make the economy wealthy. The services and goods purchased will still need to be purchased and new users to the system need to first adopt the system – these becoming the new bag holders for the generation before them. Which takes me onto the next point; a new flow of money. With a new flow of money “where is this generated”? You take the new ETF for example, this allows pension funds to invest into crypto (this is where most linear thinkers, believe it’s all rosy) they will use their chimp brain logic to only see the positive. However, as a fund manager myself I am happy to take 2% fees for the money I manage and then add a success fee on top of that usually around 15-22% The truth is when fund managers get enough money under management – the 2% fee keeps them in luxury yachts and private jet charters. The investors can make a small – usually a few points above base and the fund managers move onto the next new shinny thing for more management fees.

Moral of the story – fund managers get rich first and clients are often secondary.

If no service or value can be given, money stands still.

It is here we move into the arguments for Socialism, capitalism and Communism.

Where do you think the governments will take crypto? Do you think there is not much that governments can do? What’s your opinion on regulation? How does crypto get to $1m a coin, I mean what’s the supporting logic for such a move. Who are the new bag holders?

All comments welcome. Be interesting to see what people think of the flow to hodl thinking.

Disclaimer
This idea does not constitute as financial advice. It is for educational purposes only, our principle trader has over 20 years’ experience in stocks, ETF’s, and Forex. Hence each trade setup might have different hold times, entry or exit conditions, and will vary from the post/idea shared here. You can use the information from this post to make your own trading plan for the instrument discussed. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.