ZenMode Snapshot: Bitcoin Fundamental/Technical Analysis
Still think the fundamentals for bitcoin are incredibly bullish:
Miners:
I have gotten questions about why the sell off in commodities, crypto, treasuries and equities last week - and aside from technical reasons, the article sourced below from Bloomberg is a must read:
"Already low short-term interest rates are set to sink further, potentially below zero, after the Treasury announced plans earlier this month to reduce the stockpile of cash it amassed at the Fed over the last year to fight the pandemic and the deep recession it caused. The move, which aims to return its cash position at the central bank to more normal levels, will flood the financial system with liquidity and complicate Powell’s effort to keep a tight grip over money market rates.”
" ... a drop in short-term market rates into negative territory could prove disruptive, especially for money market funds that invest in short-dated Treasury securities. Banks may also find themselves hamstrung by effectively being forced to hold large unwanted cash balances at the central bank. The Treasury’s decision -- unveiled at its quarterly refunding announcement -- will help unleash what Credit Suisse Group AG analyst Zoltan Pozsar calls a “tsunami” of reserves into the financial system and on to the Fed’s balance sheet. Combined with the Fed’s asset purchases, that could swell reserves to about $5 trillion by the end of June, from an already lofty $3.3 trillion now."
"Here’s how it works: Treasury sends out checks drawn on its general account at the Fed, which operates like the government’s checking account. When recipients deposit the funds with their bank, the bank presents the check to the Fed, which debits the Treasury’s account and credits the bank’s Fed account, otherwise known as their reserve balance."
So think about this from the perspective of a financial institution, they would have to make the Treasury market holding a product with potentially negative yield - while also forced to buy insurance on the larger reserves they will need to manage. If you are a financial institution are you going to want to offer financing in the overnight market that has negative yield so a company you work with can hold Treasuries? And with the flood of Treasuries & Liquidity this also has muscled up the 5Y yield while the repo market might potentially be going negative. With the 5Y yield up now in Treasuries I am reading how the 10Y yield is comparable now to the SPY Dividend of 1.45% - and keep in mind the reduced risks in holding Treasuries. They are practically as good as gold for a corpo.
10Y Yield
10Y Bond
5Y Yield
5Y Bond
So while the Federal Reserve controls the Federal Funds Rate, the Treasury Department can absolutely impact the yield in treasuries, and impact the overnight rate.
This hurt risk assets, as the market now needs to price in Treasuries actually offering yields potentially worth getting into. A fascinating exchange exchange with MicroStrategy CEO Saylor talking to Bloomberg discusses thought that even now this yield is a pittance when compared to the cost of capital for companies. It is telling that a company with modest cash flow is saying that rather that investing into their operations further, and rather than giving back to shareholders, or doing share buy backs they are purchasing bitcoin as the yield on bitcoin is stunning relative to Treasuries or holding a basket of FANG stocks.
Really interesting interview worth watching:
https://www.youtube.com/watch?fbclid=IwAR0pGmzq2RX-7248DKxJbgRyhnQnTydx5PkoBZ_RHWgVE0uv1E9ygEN_xzk&v=CoOPoIpLFpQ&feature=youtu.be
The key is if other executives will follow the lead of TSLA, SQ, MSTR and add Bitcoin on the balance sheet. While it may seem unconventional, keep in mind if you are a multinational corporation it is perfectly normal to have hundreds of bank accounts, like Disney, Microsoft or Facebook for example because you have vendors all over the world you will need to compensate for their services, in their currencies.
Technical Snapshots:
In closing, do not forget, why is the Repo market going negative, and why are 5Y yields rising? Inflation concerns. The formula for inflation is M2*V= inflation. Velocity will increase as the nation opens back up causing inflation, especially as the M2 supply is about to take on another jolt. I suspect this stimulus will pass, and I think Bitcoin is a potential lifeboat when inflation hits. Yes, we need to price in treasuries now - and yes I thought it was bonkers that the market suddenly tanks treasuries to pop yield for inflation and then - the market rotates into the dollar? So inflation is coming and the dollar rises as it did on Friday? I think I would recommend parking some wealth in the bitcoin lifeboat. Perhaps a moonshot, but this macro-narrative warrants it in my opinion.
Final Quote coming from Michael Burry last week:
"The US government is inviting inflation with its MMT-tinged policies. Brisk Debt/GDP, M2 increases while retail sales, PMI stage V recovery. Trillions more stimulus & re-opening to boost demand as employee and supply chain costs skyrocket." #ParadigmShift
— Cassandra (@michaeljburry) February 20, 2021
Good luck traders! If you enjoy please be sure to hit the like button, and tell me what you think! Hope you all make a million! :)
Keep in mind when the gold-bitcoin bears come out saying that it is too volatile, it is worth advising that even with this sell off you can still acquire an ounce of gold for only 0.038 BTC:
Or 745 barrels of oil:
Source:
https://www.bloomberg.com/news/articles/2021-02-16/yellen-shift-on-vast-treasury-cash-pile-poses-problem-for-powell
Miners:
- Outflows - Bearish
- Miners still depositing to exchanges - Bearish
- Reserves Increasing - Bullish
- Transferring BTC off exchanges - Bullish
- Still a narrative of corporations acquiring BTC in leu of traditional treasury assets - like treasuries
- Bombarded with treasury yields now indicating inflation is coming
- $1.9 T Stimulus
I have gotten questions about why the sell off in commodities, crypto, treasuries and equities last week - and aside from technical reasons, the article sourced below from Bloomberg is a must read:
"Already low short-term interest rates are set to sink further, potentially below zero, after the Treasury announced plans earlier this month to reduce the stockpile of cash it amassed at the Fed over the last year to fight the pandemic and the deep recession it caused. The move, which aims to return its cash position at the central bank to more normal levels, will flood the financial system with liquidity and complicate Powell’s effort to keep a tight grip over money market rates.”
" ... a drop in short-term market rates into negative territory could prove disruptive, especially for money market funds that invest in short-dated Treasury securities. Banks may also find themselves hamstrung by effectively being forced to hold large unwanted cash balances at the central bank. The Treasury’s decision -- unveiled at its quarterly refunding announcement -- will help unleash what Credit Suisse Group AG analyst Zoltan Pozsar calls a “tsunami” of reserves into the financial system and on to the Fed’s balance sheet. Combined with the Fed’s asset purchases, that could swell reserves to about $5 trillion by the end of June, from an already lofty $3.3 trillion now."
"Here’s how it works: Treasury sends out checks drawn on its general account at the Fed, which operates like the government’s checking account. When recipients deposit the funds with their bank, the bank presents the check to the Fed, which debits the Treasury’s account and credits the bank’s Fed account, otherwise known as their reserve balance."
So think about this from the perspective of a financial institution, they would have to make the Treasury market holding a product with potentially negative yield - while also forced to buy insurance on the larger reserves they will need to manage. If you are a financial institution are you going to want to offer financing in the overnight market that has negative yield so a company you work with can hold Treasuries? And with the flood of Treasuries & Liquidity this also has muscled up the 5Y yield while the repo market might potentially be going negative. With the 5Y yield up now in Treasuries I am reading how the 10Y yield is comparable now to the SPY Dividend of 1.45% - and keep in mind the reduced risks in holding Treasuries. They are practically as good as gold for a corpo.
10Y Yield
10Y Bond
5Y Yield
5Y Bond
So while the Federal Reserve controls the Federal Funds Rate, the Treasury Department can absolutely impact the yield in treasuries, and impact the overnight rate.
This hurt risk assets, as the market now needs to price in Treasuries actually offering yields potentially worth getting into. A fascinating exchange exchange with MicroStrategy CEO Saylor talking to Bloomberg discusses thought that even now this yield is a pittance when compared to the cost of capital for companies. It is telling that a company with modest cash flow is saying that rather that investing into their operations further, and rather than giving back to shareholders, or doing share buy backs they are purchasing bitcoin as the yield on bitcoin is stunning relative to Treasuries or holding a basket of FANG stocks.
Really interesting interview worth watching:
https://www.youtube.com/watch?fbclid=IwAR0pGmzq2RX-7248DKxJbgRyhnQnTydx5PkoBZ_RHWgVE0uv1E9ygEN_xzk&v=CoOPoIpLFpQ&feature=youtu.be
The key is if other executives will follow the lead of TSLA, SQ, MSTR and add Bitcoin on the balance sheet. While it may seem unconventional, keep in mind if you are a multinational corporation it is perfectly normal to have hundreds of bank accounts, like Disney, Microsoft or Facebook for example because you have vendors all over the world you will need to compensate for their services, in their currencies.
Technical Snapshots:
- If price continues to sell off nice confluence of support with pivot points/fibonacci fan & bollingers at $40k - $40k breaks, we could hit $38k rather rapidly before I imagine buyers will be attracted
- Bulls will have a tough time breaking $48.5k followed by $50k . Even then, we might form a lower higher, and test support yet another time before continuing to new ATH
- I remain long, and am nibbling on dips, and enjoying these rips. I plan on adding to the position if we break $40k. My exit strategy will be to bail If we fall under $28k, as at that point I would have 3X'd the initial cost basis of this position.
In closing, do not forget, why is the Repo market going negative, and why are 5Y yields rising? Inflation concerns. The formula for inflation is M2*V= inflation. Velocity will increase as the nation opens back up causing inflation, especially as the M2 supply is about to take on another jolt. I suspect this stimulus will pass, and I think Bitcoin is a potential lifeboat when inflation hits. Yes, we need to price in treasuries now - and yes I thought it was bonkers that the market suddenly tanks treasuries to pop yield for inflation and then - the market rotates into the dollar? So inflation is coming and the dollar rises as it did on Friday? I think I would recommend parking some wealth in the bitcoin lifeboat. Perhaps a moonshot, but this macro-narrative warrants it in my opinion.
Final Quote coming from Michael Burry last week:
"The US government is inviting inflation with its MMT-tinged policies. Brisk Debt/GDP, M2 increases while retail sales, PMI stage V recovery. Trillions more stimulus & re-opening to boost demand as employee and supply chain costs skyrocket." #ParadigmShift
— Cassandra (@michaeljburry) February 20, 2021
Good luck traders! If you enjoy please be sure to hit the like button, and tell me what you think! Hope you all make a million! :)
Keep in mind when the gold-bitcoin bears come out saying that it is too volatile, it is worth advising that even with this sell off you can still acquire an ounce of gold for only 0.038 BTC:
Or 745 barrels of oil:
Source:
https://www.bloomberg.com/news/articles/2021-02-16/yellen-shift-on-vast-treasury-cash-pile-poses-problem-for-powell
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