Last week I put out this update to the readers of Christian DeHaemer’s Bubble and Bust Report:
Bank Big Bitcoin Gains
Sell Half of Bitcoin for 767% Gains
Bitcoin is selling for $3,869.76. We bought at $449.23. That’s a gain of 767%.
Bitcoin has pulled back 21% from its highs on news that Jamie Dimon has gone negative on the cryptocurrency.
It’s time to lock in some gains.
Dimon King
Now, I have no doubt that Jamie Dimon is forcing the market down so he can buy it on the cheap. That’s what Wall Street is all about, and Jamie is the consummate Wall Streeter…
You might remember that in 2008 he took $25 billion in taxpayer money from the Treasury Department in the form of TARP payments.
In 2012 he got in trouble after a U.S. Senate report stated that he misled investors and regulators as part of the London Whale trade, which had $6.2 billion in losses on a derivative trade.
No Sour Grapes Here…
High triple-digit gains like 767% from Bitcoin is enough to turn $1,000 into $7,670 in a little over a year. That’s good money no matter what you think of Bitcoin.
There are many people here in the office, high atop 111 Market Place in downtown Baltimore, who are true believers in Bitcoin. They love the blockchain technology and the cool anonymous nature of the asset. These are also people in their 20s who have only vague memories of the last bubble.
Last year few people wanted Bitcoin. It had already churned and burned once. Yet I bought it for a number of very good reasons.
The chart looked like a comeback event. The price paid to miners would be cut from 0.25 to 0.125 — doubling day, as it was known, would be a positive catalyst by slashing supply. But, most importantly, it had the makings of a perfect bubble stock.
Unlike many investors, I love bubbles. Heck, over the past 30 years, that’s all we’ve had to invest in — one Fed-created bubble after another. If you don’t learn how to trade bubbles, you are in the wrong business.
The last third of a bubble is where most of the profits are made — when an asset goes parabolic. The money trick is to understand you are in a bubble. Furthermore, you need to get out while the getting is good.
But I digress. Bitcoin is/was an excellent market darling because it meets the criteria for a bubble stock.
Six identifiers of bubble stocks:
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A positive late-stage bull market. You have a general climate of positive reinforcement for being fully invested.
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There is a grain of truth. Facts are such that one can weave a glowing investment story.
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Early success. First movers made a lot of money and are branded as “experts” by latecomers.
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Verisimilitude. There is a willing suspension of disbelief as “this time is different.”
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Rejection of old-time valuation metrics. Old people who lived through bubbles can’t understand because they are using the wrong tools.
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Predictions for sky-high values. The price of the bubble asset can be as high as the imagination due to lack of price discovery or comparables. Thus, you see experts value Bitcoin at $100,000-plus.
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Going Down
The great thing about Bitcoin is there are no fundamentals.
The asset can be anything the mob wants. This makes technical analysis work. There are no earnings or P/E ratios to mess with the popular mood.
The Bitcoin chart is saying it is heading lower to between $2,700 and $3,000.
As you can see, the chart got ahead of itself. The best-case scenario for bulls is that it comes back to its uptrend line and consolidates around $3,000. This will take at least three months… so you have time.
Meanwhile, the dollar continues to fall.
YTD Dollar Index:
It’s been down all year, with good reason.
This week the Federal Reserve is meeting and is expected to announce that it will unwind its $4.5 trillion portfolio.
Like many things in the great Fed debt adventure, this great unwinding has never been done before. No one knows exactly what selling trillions in Treasuries will do to the dollar, and to Bitcoin, and especially to gold…
Logic would suggest that it will raise interest rates, slash the dollar, and kick off the next commodity super-cycle in hard assets — especially gold. You’ll remember last week I showed you the bullish Golden Triangle chart on gold prices and said you’d get one more dip to buy. That’s why I’m adding gold over the next few weeks.
All the best,
Christian DeHaemer
Check us out on YouTube!Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.
