A Realistic Case for a $10 000 Bitcoin : the Ultimate Crash is Upon Us
Disclaimer : This is not financial advice, it is for entertainment only.
All right, all right, all right, I am already hearing you but before jumping on me and use “fancy” words like FUD ; here’s the thing, I am only basing my analysis on facts. I am not saying BTC will go this low, I am merely just presenting a case study of what I think could be probable. Highly probable ? I wouldn’t go as far.
BTC has only known a bullish TradFi environment, it has been released after the 2008 subprime financial crisis to offer a decentralized currency. From that perspective, it is a success.
All current models (S2F, Log Curve Zones, etc…) have been made and back tested only during extremely favorable market conditions. I would also argue that some of them are already seeing invalidations point. Sure, BTC has touched the average expecting price action on the S2F model but it has deviated much more than previous bear markets.
Log Curve Zones model had to be remade to fit current price action which is back testing the previous bull run ATH. BTC has never done in that the past.
If the recent past is any indication (couple of years), it certainly favors a much lower bottom for BTC if it stays highly correlated to risk assets such as the S&P 500.
BTC hasn’t known a 50% correction of TradFi like in the 1973 when the world experienced its first oil shock, the 2000 dot com bubble or the 2008 housing bubble. So far, the S&P has “only” corrected about 25% which is already painful but nothing in comparison to the last financial crisis.
FED, US Monetary Policy
I am seeing an increasing number of people talking about the FED pivoting, so far, Jerome Powell has given 0 indication towards easing his QT. Worse, the US economy is still very strong to the point where the Biden administration is trying to redefine what a recession is. If anything, this is giving the FED more leeway to keep tightening.
Look back at J. Pow speeches, he talked about “some pain” is coming to the markets. In his latest FOMC meeting, he doubled down on fighting inflation first and foremost.
In order for the Fed to pivot, either the US debt interests could climb so high that it would cause a sovereign debt crisis or the economy itself could be collapsing too hard (like the housing market or even an on going car bubble). But pivoting now while inflation hasn’t really shown any sign of a real slow down could be counter productive for the Fed.
This is the hard truth, in order to tame the inflation, J. Pow needs to really hurt the economy => less consumption, less investments => prices could eventually finally go down.
The World Economy is Collapsing
First, let’s look at Europe and specifically at the Eurozone. Its current economic model is completely destroyed. It is based on low energy cost (mainly from Russia) to produce high added value items (cars for Germany, luxury commodities for France, etc…). Whatever one would think, this business model is done for the foreseeable future (especially with Nord Stream 1 & 2 being now sabotaged) which means a lot of pain will have to be endured in Europe (I live there !).
The EU has not the tools at its disposals to fight efficiently inflation. If the ECB keeps raking interests rates, it will increase significantly the sovereign debts spread between mainly Italy (also Spain) and Germany (also France) which are using the same currency ! Right now, Italy and Spain are relying on the ECB to buy back their bonds to keep them in check. However on top of it all, Italy has just elected a far right government which is not Brussels (EU capital) friendly. This, in turn, prevents the ECB to reduce its balance sheet, hence the volume of € in circulation, ultimately inflation can remain high.
The EU is on the brink of implosion, it has never been any closer than that, not even during the 2012–2013 sovereign debt crisis.
Do I need to talk about the UK ? Liz Truss is reducing taxes while raising government’s spending by a lot. This directly resulted in the GBP dumping which in turn brought the pensions funds to be margin called which had to liquidate in mass their gilts (UK bonds) forcing the BoE to intervene to buy back these bonds because at some point no buyer was in sight.
This wasn’t a nearly Lehman moment, it was actually worse.
Japan cannot tighten either. On the contrary, they are keeping they QE policy.
China, oh, China, don’t even get me started on this. The country is facing its greatest financial crisis since the CCP took the reins. Their housing market is bursting like no other which counts for about 30% of their GDP. Don’t get me wrong, China will survive but it is not going to be without major economic pain inflicted to the Chinese citizens. Oh, right, nearly forgot that the 0 Covid policy is still on going…
BTC saving grace
The only BTC saving grace would be for it to completely fulfill its role as a decentralized currency outside of anyone control. It cannot be printed like crazy like any national currency, its parameters are set in stones. For that to happen, BTC needs to decouple from TradFi.
One argument in favor of this narrative could be the latest influx made by retails investors from the Eurozone and the UK as they are witnessing their currencies taking a hard dive vs the USD. Can BTC do it ? That is the multi millions dollars question. If it can do it then we have very good chances to see BTC bottoming right now. If not…
Then ask yourself a question when you are looking at the world economy. If you are seeing anything other than a major crisis coming, then all right, BTC is currently forming a bottom.
But if you are data driven and you are seeing all the hints of the world economy coming to its knees and at the same time BTC couldn’t decouple itself from TradFi, then yes : that would be your realistic case of a $10k BTC (or lower but there is a strong support around 12k).
I hope you all had a pleasant read. If this is the case, please hit the👏 button, so this article can reach more people.
My twitter account : https://twitter.com/CryptoDeFi2048