The market mentality never ceases to amaze me. Sometimes this is a good thing, normally it is not.
The disconnect between people’s self-perceptions and that of reality is nothing short of tragic. People like to be seen as “individuals”, a fact that they will go a long way to ensure. In a world where almost everything has already been tried, people – usually the youth – cry out for attention and individuality by styling their personal appearances in ever more outlandish, tasteless and garish ways. Worse still: look around and you will find yourself surrounded by a sea of self-identified “critical thinkers” – people who profess to think for themselves, who don’t follow trends and who prefer to lead rather than follow.
It’s not that they’re lying to you, they’re lying to themselves. They believe their own lies; their own self-delusion. Each little sheep serious believes that it is different to the rest. It isn’t.
People are herd animals. The analogy between people and sheep is not some facetious or sardonic dig at humanity, it is an EXTREMELY accurate depiction of of the mental state of the vast majority of people, and spot on when assessing people as a collective.
We are not individual critical thinkers, we are a hive-mind. We dare not think outside the box of socially accepted thoughts, we dare not have the courage and conviction to go against the grain.
If you are one of the rare intelligent and brave critical thinkers – then congratulations. If you are a cryptocurrency investor, you have a far higher chance of being such a person. But don’t make the mistake of thinking that most people – even your fellow crypto investors – think like you do. They don’t. After all, don’t they buy BSV? Ripple? Bitconnect?
Market Panic
And so it comes about that when Covid-19 causes the markets to panic, people default to their familiar and comfortable ovine behaviour.
Make no mistake:
The threat posed by the latest Coronavirus is VERY real! One of my many fields of interest is tracking the growth and spread of virus outbreaks. This one is like nothing I’ve ever seen in my lifetime. Not to be alarmist, but I think that governments should be reacting far faster and more strictly than what they already have. I know that that may sound like a contradiction coming from a staunch anti-government campaigner such as myself, but the reality today is that we do live in a government-ruled world, and consequently they are the only ones with the power to react to a potential global pandemic.
I believe that Covid-19 will almost certainly become a global pandemic of severe proportions. I believe that responsible governments should have already completely closed their borders or at least implemented multi-week quarantine procedures for ALL inbound travellers, in order to protect their citizens from the spread of the virus.
Covid-19 will have a real impact on most industries, especially on manufacturing and global logistics. The knock-on effects will be felt acutely elsewhere, e.g. in the price of oil or in the mining of iron ore.
I still believe that there is no need for individuals to panic, and that common sense precautions – relative to the area in which you live – can keep you safe, even if you life in an area as hard hit as the Wuhan region of China.
Make no (other) mistake:
The markets will bounce back!
This is not the end of life or society as we know it, it’s merely a temporary setback.
The cyclic nature of the market has ensured that it first under-reacted, then overreacted, then almost immediately grew complacent and under-reacted again, before slipping back into gross over-reaction mode – where we find now ourselves (with the upswing already starting to kick back in; at least until the next over-reactionary downswing).
Market Trends
I have made no secret of the fact that I have been expecting a large international market crash for some time already. Late last year I started putting a time to that crash (or at least to the beginning of it): 6 – 24 months away. I’m not the only one to think that way, I have seen increasing numbers of economists and analysts stating similar ideas and timelines.
This is not that crash. (Probably)
That crash will be defined by a total lack of faith in the market. It will come about when the realisation of the failure of central bank fiat money manipulation policies becomes widespread. It will come about after all the “not QEs” fail, after negative yields become too big to ignore, after inflation/unemployment curves break-down, after bank runs reveal the shortcomings of fractional reserve banking etc. Those things have yet to come about, meaning that this is not THAT crash.
Importantly: what Covid-19 panic may well do is to delay that crash.
The effect of this temporary market contraction will probably be to place a plaster over the gaping fiat wound. It may allow that system to continue limping along on its last legs. That by no means implies that the fiat-based assets will struggle along as they emerge from the virus FUD. Au contraire, I expect them to fly along once again, up until the point that their bubble bursts.
Selling the drama: [1]
Last week the BTC bashing began (again): “it’s obviously not a store of value”, “BTC is revealing it’s weakness” etc. That’s not true. Those comments were premature and – frankly – stupid. (Stupid journalists are a dime a dozen.)
This analyst is telling you that the fact that BTC only started losing ground last week was:
- An indication that it is already held in high regard as a store-of-value,
- Only partially linked to Coronavirus news – BTC is (still) overvalued compared to its long-term base trendline, something you will see in all my recent long-term BTC posts and Tweets. It was due for a retraction.
I say this over and over again: the news does not drive the price of crypto. Prices are driven by long-term market sentiment. News that fits the price movement narrative is cherry-picked after the fact. I can show you pages and pages of extremely positive crypto news from 2018 – all of it ignored by the market.
The way I read the charts: BTC hung in as a store of value until 25 Feb, at which stage it departed the diagonal Fib level it had been clinging onto. By comparison: Platinum started its plunge on the same day.
Only two days later (27 Feb), they were joined by Silver and Gold.
Major market indicators like the S&P and Dow started their plunge the day before BTC did. There is no doubt in my mind that BTC (and other cryptocurrencies ) are being sold off to prop-up losses elsewhere as the market goes into panic.
In itself, this is also significant. It means that institutional investors, or at least serious private investors, hold sufficient quantities of BTC to carry out such a sell-off. It could just be regular investors selling their BTC, but the question is then “Why?” Few BTC holders are professional traders. Of course BTC traders do exist, but the average BTC holder is an amateur investor who probably has little interest in trading this dip – which would be a high risk move for an amateur trader.
With Platinum losing ground alongside BTC, we can gauge the relative value of BTC as a “hodl” asset. Frankly I consider that BTC being viewed as being on par with Platinum – despite only being 11-years-old and still untested by the majority of the world population – is a major feather in BTC’s cap. It reflects the credibility of BTC (and of decentralised cryptocurrencies in general) as an investment asset.
Watching Gold and Silver being sold off two days later was not exactly unexpected, but still shocking nonetheless.
My question is always: what are they selling it FOR? What is a better asset to hold in times of trouble?
Yes, I understand “Sell high, buy low”, but once again, most of us are not traders who bounce in and out of these assets at the drop of a hat. I also get that longs must have been squeezed, but still, for people to sell that much Gold, Silver, Platinum, BTC – it’s crazy!
What did they buy with that money? Did they keep it in USD? I’m all for a little risk, but holding money in fiat itself – that’s not something I could ever recommend! I mean – seriously – would you really sell limited-supply-and-always-precious Gold for unlimited-supply-and-constantly-devalued-only-fractionally-backed-debt-based-manipulated USD? Or were those funds perhaps used to prop up investments in the stock market – in overpriced stocks – virtually guaranteed to get slaughtered in a market crash? Perhaps (and most probably) the money went into the derivatives market – to ethereal asset classes built on the shaky unbacked-debt foundations of fiat (itself built on shaky unbacked debt).
What’s their next step to prop their weak assets up? Mortgage their homes? Don’t laugh, I’m not kidding, I promise you it will happen.
And all for what? To keep the house of cards standing just a little longer?
That makes no sense!
Trading good solid assets, assets which you can’t manipulate the supply of, assets which will always have inherent value – for the likes of ETFs and bonds and options in a market of fake assets: that’s not risky, that’s lunacy!
The Bounce – and other thoughts
The good assets will bounce back, they always do. You can’t keep a good investment down. No matter what happens, they will always rise back up. There is no way on Earth that I would ever dream of selling my BTC off now. The same applies to my precious metals. If you want to trade the dip and make incremental gains – then go for it – for a trader that makes sense. But if you’re holding them as part of a long-term asset portfolio, then you are nuts to liquidate them!
If, as I mentioned earlier, this dip has the effect of delaying a major market crash, then that could work out VERY well for BTC! I’ve remarked before that BTC is probably not quite ready enough to take over from fiat in the event of a major crash. It’s not quite ubiquitous enough, not quite trusted enough, not quite developed and tested enough. BUT: give it another two or three years to get ready…
It is noteworthy that while BTC lost ground now, altcoins did not lose value! That means that the market did not turn bearish, the positive crypto sentiment is still there. Weak hands sold – market sentiment didn’t turn.
It is also worth noting that the price of Palladium dropped by a relatively small amount. Considering the drop of Gold and Silver, this is also nonsensical. Palladium is not a traditional store of value, it derives its value mainly from its uses in industry. Silver and Gold are both useful to industry, AND are stores of value. For them to lose so much value is clearly a panic reaction brought on by a sheep mentality. If I had money available, I would buy Silver and Gold today. I’d buy Platinum too, its still way too cheap (compared to Gold and Palladium). I wouldn’t touch Palladium – its over-valued and in a bubble, much like most of the stocks and derivative “assets” (though at least it has intrinsic value).
Conclusion
With a virus running around the world, suddenly my recent “Silver for Survivalists” series doesn’t seem so far-fetched, does it?
The advantage of being a brilliant futurist is that I can see the future. The disadvantage is that I have to watch those who fail to heed my warnings blunder on in the wrong direction. I take no pleasure in saying “I told you so”, so please act while there is still time…
My condolences to all those who have lost loved ones to Covid-19. To the rest of you: please take care. There is no need to panic, just take reasonable precautions and don’t make the mistake of thinking “it won’t happen to me”.
[1] – If you caught that reference then I can tell you two things about yourself: you’re probably Gen-X or older, and you have some good taste in music.
Yours in crypto
Bit Brain
“The secret to success: find out where people are going and get there first”
~ Mark Twain
“Crypto does not require institutional investment to succeed; institutions require crypto investments to remain successful”
~ Bit Brain
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