Monitoring the Crypto Bubble

Where do you think we are in the crypto bubble?

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BREAKING: Tether has minted another $1B out of thin air and injected it into Bitcoin.

If you’re wondering why Bitcoin is above 100K, it’s entirely due to a massive price manipulation scheme that’s happening quietly in the background. The largest fraud in history.

Looks like the same game play as the fiat system
 
USDT dominance (green and red candlesticks) as a % of the total MC of all crypto assets has been in decline since January 2023 while at the same time the price of BTC (in black) has risen from $16K.

USDT.D_2024-12-06_09-59-35.png
 
Still don't love crypto and wouldn't recommend it as a long-term investment. I'm young, my model for timing when it's over still obviously needs some work - but I do think it is soon (i.e., I concede defeat that I wasn't right initally:rolleyes::p).

I've done some more backtesting, and typically there is a prolonged consolidation (where it looks like selling is occuring institutionally) prior to the final leg of the asset before it turns bearish. This makes sense, as in order to liquidate large insitutional positions, you would need to stoke new interest in the asset to offload (i.e., retail liquidity), usually this is through breaking new highs as buy side liquidity would reside there. Same would go in inverse when looking for a low to form.

IMO Bitcoin is likely nearing this high, as from the original swing consolidation it is already at a 1+ STD (1+STD was $98917.43). Because of this, I believe BTC is in an incredible premium market right now and I personally wouldn't buy here. As it is beyond it's 1+STD as of now, the next level of interest for a potential reversal would be whatever the last swing was ($90732 - $99804) and extrapolating a quarterly range figure into the future, which is $102073. I'm not just obviously looking at range theories to suggest when a high is to form, I use non-commercial positioning, open interest, risk off currencies positioning, and on chain data to help support whether I should even be looking for this in the first place.

I just generally think overall that risk assets (including crypto) are hugely overvalued. The stock market itself is multiples above where it should "mathematically" suggest, which concerns me deploying any capital into these markets. It's my belief that if a significant crash in equities and risk assets is on the horizon, the debt market is less attractive as a safe haven investment with the amount of government debt there is (and how they will manage that debt), and would promote more allocation to precious metals.
 
We might not see eye to eye on cryptos, but at the very least we all share interest in the metals which is good. Can't say I know anyone else my age that even bats an eye towards the idea of it.
 
@IPDA , I've got a couple questions.

1. What's STD?
2. Where should the stock market be "mathematically"?
3. How did you work that out?
4. What are your concerns regarding the risk from sovereign debt levels?
 
mmm....shiney! said:
@IPDA , I've got a couple questions.

1. What's STD?
2. Where should the stock market be "mathematically"?
3. How did you work that out?
4. What are your concerns regarding the risk from sovereign debt levels?
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Sure!

1. STD refers to the standard deviation of a price swing. Generally these can be insightful for price projections and potential areas of selling or buying. STD + 1 refers to a complete symmetrical price swing from the intial swing leg leading up to the expansion we've seen. With the use of other tools, it MIGHT be interpreted as the top of the market, or at least within the area of it.

2. Thought this would be brought up, not sure if mathematically was the right term to use. But using some fairly basic market valuation indicators like total stock market / total gdp OR even a leading indicator like shillers p/e ratio it paints a fairly bleak picture for returns in equities coming the next few years. Shillers P/E ratio has never been this high since the dot come bubble, generally when this is high it will revert to it's mean. That doesn't mean it will happen next month or even in a year, but it does mean that within the next 10 years the returns for equities will be much worse off than the previous.

3. A lot of things I just worked out through backtesing lots of previous cycles. I also have a mentor that taught me some institutional concepts (i.e., like the standard deviation of -0.25 @ ALH's) but for the most part I just try and follow the smart money and how they're positioning.

4. It's my belief that debt instruments will become less attractive as the debt grows larger and larger. My concerns are around how they will manage this debt, if we're leading into thucydides trap and trade wars really kick off, revenues won't be the saving grace for government. More likely than not the only way they will address the debt is to inflate it away, just like Weimar Germany.
 
mmm....shiney! said:
@IPDA , I've got a couple questions.

1. What's STD?
2. Where should the stock market be "mathematically"?
3. How did you work that out?
4. What are your concerns regarding the risk from sovereign debt levels?
Click to expand...

A new concept I'm adding to the arsenal for my model on BTC is intermarket analysis. If this latest swing had real conviction we would have seen MicroStrategy stock soar above it's recent high, instead it was actually down -4.83% on the day. Considering how leveraged the company is to Bitcoin, it should move in tandem.
 
IPDA said:
... It's my belief that if a significant crash in equities and risk assets is on the horizon, the debt market is less attractive as a safe haven investment with the amount of government debt there is (and how they will manage that debt), and would promote more allocation to precious metals.
Click to expand...

This is something that I've been thinking about for a while now. There is a decent chance that NVDA might blow up due to accounting fraud (like Enron) and Binance might get exposed for fraud similar to FTX (comingling customer and operating funds). There is some smoke floating around on both issues and neither one seems to have captured the attention of the markets - the risk doesn't appear to be priced in. If they catalyze, it's going to get a bit disorderly.
 
Thanks @IPDA, there's a few things for me to digest, statistics is not an area I'm strong in. It will take time as I only ustilise 1 indicator when determining at what price to buy a particular stock and it's not a market or sector wide indicator but looks at the stock in isolation.

Your comments around MSTR are interesting and will take time to investigate. My initial thoughts on it are that there are underlying factors involved, also, the recent ATH was not strongly supported in the market as indicated in post https://www.silverstackers.com/foru...the-crypto-bubble.87398/page-143#post-1286272

I'm not a stock market bear, I don't have a handle on the ratios often referred to so I usually just shrug my shoulders when discussion turns to those, but I do know that bears have existed since eternity and I think they're usually wrong. It's easier to be a bear than a bull because human nature is generally more accepting of views that portray a negative outcome in the future rather than a positive one due to the predominantly pessimistic outlook in human nature, a hangover from our evolutionary journey. The late J Boorman put it well in his last post on X on this topic when he said in April 2016 - "Nearly a year since the high but safe to say in the battle of $SPX vs Pundits, $SPX is still winning."


1520236228331


https://x.com/jboorman/status/724986679820345346
 
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IPDA said:
4. It's my belief that debt instruments will become less attractive as the debt grows larger and larger. My concerns are around how they will manage this debt, if we're leading into thucydides trap and trade wars really kick off, revenues won't be the saving grace for government. More likely than not the only way they will address the debt is to inflate it away, just like Weimar Germany.
Click to expand...

I'm actually in the other camp ie debt instruments in particular those denominated in USD will be in greater demand going forward. I rambled about it somewhere else on this forum. Add to that the fact that sovereign governments (and I'm talking about those that issue debt in their domestic currency) are not revenue constrained therefore while interest on debt may become an increasingly greater portion of a budget they can always find the funds to meet their commitments and these interest payments improve liquidity in the real economy. And finally, a Weimar Republic type scenario is not really a likely outcome for the likes of nations such as the US, Oz, UK, NZ etc, I've also rambled about that in this forum on numerous occasions.
 
mmm....shiney! said:
Thanks @IPDA, there's a few things for me to digest, statistics is not an area I'm strong in. It will take time as I only ustilise 1 indicator when determining at what price to buy a particular stock and it's not a market or sector wide indicator but looks at the stock in isolation.

Your comments around MSTR are interesting and will take time to investigate. My initial thoughts on it are that there are underlying factors involved, also, the recent ATH was not strongly supported in the market as indicated in post https://www.silverstackers.com/foru...the-crypto-bubble.87398/page-143#post-1286272

I'm not a stock market bear, I don't have a handle on the ratios often referred to so I usually just shrug my shoulders when discussion turns to those, but I do know that bears have existed since eternity and I think they're usually wrong. It's easier to be a bear than a bull because human nature is generally more accepting of views that portray a negative outcome in the future rather than a positive one due to the predominantly pessimistic outlook in human nature, a hangover from our evolutionary journey. The late J Boorman put it well in his last post on X on this topic when he said in April 2016 - "Nearly a year since the high but safe to say in the battle of $SPX vs Pundits, $SPX is still winning."


1520236228331


https://x.com/jboorman/status/724986679820345346
Click to expand...

I'm not a bear because of human nature, I'm a bear because that's what my model suggests. You could always say the same thing for being a bull, if you do not have a plan to manage your capital then in my opinion you'd just be gambling.

Thucydides trap is also human nature, this is very pessimistic for markets.

I do agree with you that a lot of talking heads have always said it'll crash, but a lot of talking heads have always pumped Bitcoin even when it was in it's final days in a bull market. It goes both ways. I actually use these talking heads and mainstream media as a tool too, when I see a mass amount of articles pumping Bitcoin or a lot of articles saying "Could this be the top in the Gold market?" I like to fade these if everything else is in agreement.

It's definitely worth looking into, it applies to every market with any sister assets. For example EURUSD & GBPUSD can be used for intermarket analysis too. Like I said, because MicroStrategy is so heavily leveraged to the price of Bitcoin, it should in theory be traded in symmetry. When symmetrical markets are broken this is when a manipulation event is taking place.
 
mmm....shiney! said:
I'm actually in the other camp ie debt instruments in particular those denominated in USD will be in greater demand going forward. I rambled about it somewhere else on this forum. Add to that the fact that sovereign governments (and I'm talking about those that issue debt in their domestic currency) are not revenue constrained therefore while interest on debt may become an increasingly greater portion of a budget they can always find the funds to meet their commitments and these interest payments improve liquidity in the real economy. And finally, a Weimar Republic type scenario is not really a likely outcome for the likes of nations such as the US, Oz, UK, NZ etc, I've also rambled about that in this forum on numerous occasions.
Click to expand...
Does debt ever become a burden then? When would too much debt be a catalyst for something, or are you suggesting that they can continuously kick the can down the road. Why couldn't the Weimar Republic situation on inflating the debt away be a likely scenario, they don't have enough revenues and industry to payoff the debt. If they never pay off their debt why would anyone or nation want to buy debt instruments? The credibility would and has been significantly declining which would make it extremely difficult or impossible for the country to borrow money in the future.
 
IPDA said:
Like I said, because MicroStrategy is so heavily leveraged to the price of Bitcoin, it should in theory be traded in symmetry.
Click to expand...

Yes in theory I suppose, but that hasn't panned out that way with a YTD increase of 470% has it compared to BTC's 135% gains?
 
IPDA said:
Does debt ever become a burden then? When would too much debt be a catalyst for something, or are you suggesting that they can continuously kick the can down the road.
Click to expand...

If increasing levels of debt create a situation where government continually increase spending, then the danger threshold is the point where spending exceeds a country's capacity to produce or import enough goods to satisfy demand.

I'm not sure what the "can" is full of so I'm unsure why it needs to be kicked down the road in perpetuity. ;)

IPDA said:
Why couldn't the Weimar Republic situation on inflating the debt away be a likely scenario, they don't have enough revenues and industry to payoff the debt. If they never pay off their debt why would anyone or nation want to buy debt instruments? The credibility would and has been significantly declining which would make it extremely difficult or impossible for the country to borrow money in the future.
Click to expand...

The Weimar Republic was unable to produce or import enough goods to meet demand.

A government doesn't need revenue to pay off debt as it creates it's own currency, taxes are not revenue, they are a means to control the amount of liquidity circulating in the real economy. The US, Oz, UK government etc can never default unless by choice and the credibility of these nations is not in question by those seeking to purchase their debt instruments as reserve assets. And lastly, a government doesn't need to issue debt to fund expenditure, it's just the way it happens.
 
robertc400 said:
Does anybody here think its a possibility that the government will reprice Gold instead of inflating their way out of debt?
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No imo as any action taken that elevates gold undermines faith in fiat and reinforces the idea of real money, trust in government has eroded even more so in last few years as even the willfully ignorant have woken up to the blatant bullshit facts,figures and outright lies they continually try ram down our throats. The two must remain separate so gov spending,printing,etc can continue according to grand plan and faith in printed currency continues...just amateur opinion
 
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