We don’t have to dig too far into our memory banks to find the ne plus ultra of tail whips in the bitcoin market, as it just happened back on March 12, 2020. The Covid shock wave.
If you’re a trader, that day is permanently seared in your memory. I saw things on that day never seen before, and hopefully never to be seen again, specifically the vega (volatility component) on options pricing on Deribit becoming unhinged and moving with alarming speed towards infinity. It shocked me to the core. I still have PTSD when I remember it, and I’m not even joking a little bit about that.
That was an 8-sigma move in fear generation. 8 standard deviations away from normal, something deemed impossible by every statistical practitioner. For perspective, a measly 5-sigma move is only supposed to happen 1 day every 13,982 years.
So an 8-sigma drop should happen approximately……never ever in the known universe. Once every 6.43 trillion years. But it happened. In bitcoin, of course.
It was also a tail whip to the downside, which became the direct precursor to a massive bull market.
Notice the same structure to the current tail whip, in more exaggerated form. First the move up, followed by the waterfall drop for one final nasty, stinging slash of the bear market propagation line.
At the risk of mixing metaphors, a tail whip to the downside can also be flipped around and reconstrued as a slingshot to the upside. Or more precisely, it’s like stretching a rubber band back before a slingshot launch.
Markets are physical, energetic systems that follow properties of motion, wave propagation and refraction, and even electromagnetism and polarity. I have spent the last 20 years studying financial markets from this perspective – as natural, energetic, physical systems formed by the shifting mass consciousness of market participants -- as opposed to using technical or statistical analysis, which does a great job describing what’s already happened, but is essentially worthless when it comes to predicting what’s going to happen in the future.
With a slingshot move up, there is sensitivity to initial conditions. The amount the slingshot is pulled back has an effect on the subsequent trajectory.
In March 2020 the markets rallied furiously off the covid low, which was a natural and expected occurrence after such an unprecedented drop. The rubber band was really stretched back.
This time the tail whip is coming after an extended sideways-to-down churn. This sideways period has been important, as it’s had an absolutely devastating effect on sentiment about bitcoin’s future price movement. This negative sentiment is pure upside fuel, and the tank is full. Now with the FTX tail whip, there are some extra gas cans strapped on the back.
This should give this upside move plenty of staying power – 24 months to the upside – but it is likely to take some time to really get flying to the upside. I’ll have more on this trajectory in upcoming posts.
Of course all of my speculative talk about these putative gains has to materialize in the real world, with the bitcoin market responding to the upside over the upcoming period.
It’s important now for the bitcoin price to reverse into late November and turn this currently nasty looking red monthly candle into a “wick down” reversal and the expected slingshot up.
There are some additional compelling timing factors to this mid-November period as a major reversal point. More specifically this low is happening right at one of the 4 important energy peaks of the year.
These energy peaks are strongly associated with reversal points in financial markets. These are the specific moments where trends reach an end point, and a new thing starts. These energy peaks trigger polarity flips. The reason this happens is complex, but supremely interesting, but I’ll have to go over the details on these energy peaks at some future point, as there is 20 years of work behind this and it’s impossible to get it out in a few paragraphs.
But the empirical evidence on these energy peaks and polarity flips, marked on the chart below, should speak for itself.
Of the 4 energy peaks – February, May, August, and November – the November peak is the strongest. It tends to have the greatest effect on the markets. This frequently results in strong trends in bitcoin at the end of the calendar year, in late November and December.
The precise timing of this November energy peak is this week, exactly coinciding with the tail whip and this current waffling, uncertain aftermath. I believe this is very significant.
There is also the Fed to throw in this mix for a November low. My god….the Fed. What a disaster.
Rarely is there one chart that succinctly sums up a macroeconomic situation, but we’ve got one right now.
This chart is a very good proxy for the interest payments on the US national debt. (I didn’t come up with it, so thank you to @ThHappyHawaiian on Twitter for posting the original).
For decades, the Fed has capped its hiking cycles at predictable boundary lines, for an important reason. They need to avoid a death spiral or “doom loop” created by (self-imposed!) high interest payments on debt and deficits. This death spiral kicks in when interest payments take up such a huge chunk of income that new debt has to be issued just to cover those interest payments. It’s like opening up a new credit card to pay the interest on the cards you just used up.
The Fed has jacked up interest payments way, way beyond the sensible bounded upper limit.
They are so far into triggering the doom loop they are never coming back.
What does that mean?
It’s pretty obvious to me -- and I’ve been forced, against my will, to study the Fed for a long time – that they will soon have to go back to one of the 2 knobs that they can control and dial up the liquidity in a big way.
That liquidity is rocket fuel for bitcoin.
I don’t want to get too bogged down with Fed talk, because it’s boring and they are on the way to being irrelevant, and I hate everything about them and everything they represent and stand for, as well as their tactics of disinformation and manipulation.
But unfortunately they still have their hands on 2 monetary knobs that they dial up and down, and these do have an effect on bitcoin. Bitcoin is a trading pair with the US Dollar, and they definitely have effects on the dollar.
They have the interest rate knob, and the liquidity knob.
That’s it. It’s not that complicated.
The interest rate knob is the one everybody gets fired up about it, but in my opinion it’s largely irrelevant at this point.
It’s the liquidity knob that counts. And after having this knob cranked all the way to the left, choking off oxygen to the global economy – just brutal asphyxiation -- they are now going to have to crank it all the way to the right, maximum wide-open, and then come up with new ways to crank it up further.
I’m going to leave it there for now, as my wife and our amazing Bernese mountain dog named Fred are waiting for me to go on a walk on this lovely day and I really need to push back from the screens and get outside.
We’ll pick this up again in Part 3 in a few days. The stuff about the Fed is, unfortunately, important and worth contemplating for a few moments, so I'll come back to it.
так просто о сложном ещё ни кто не писал. возможно это будет их последний поворот ручки до упора. биткоин так будет рости по экспоненте несколько лет... минуя цикл падения и халвинга. значит это последняя рогатка к новой фин системе... я все понял. спасибо тебе человек.