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Bitcoin: USD/BTC (BTC=X), Bonds and Gold: Why Markets Are Upended in a Time of Fear

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Bitcoin: USD/BTC (BTC=X), Bonds and Gold: Why Markets Are Upended in a Time of Fear

Anyone seen the movie “Parasite”? You know, the one about class mobility, creative solutions and scary basements.

I thought of that film after reading Jill Carlson’s op-ed a couple of days ago – she looks at our collective surprise that bitcoin is not a safe haven, and in a gentle way asks “well what did you expect?” She highlights that bitcoin (BTC) is too young to be considered a safe haven because its narrative is not yet formed. That doesn’t mean it won’t eventually get there, though.

What does this have to do with a South Korean Oscar winner? Well, in “Parasite” we spend the first hour thinking the film is about one thing but it turns out it’s not, it’s about something totally different.

The same thing is happening in cryptoland. Jill’s right: Bitcoin’s narrative is the key driver of its price trends, and it will change over time. The story isn’t about what bitcoin “is” but about what it “will be.” 

An even more interesting narrative shift, however, is unfolding elsewhere.

I’m talking about the rest of the market. Almost all of it, in fact. Narratives are shifting all over the place.

For instance, everyone knows you should have bonds in your portfolio because they offer income and stability. I mean, there’s no way rates could go negative, right? 

This week the yield on 30-year and 10-year U.S. government debt dropped to their lowest levels ever. The S&P 500 now yields more than Treasurys, calling into question the entire concept of “risk distribution.” 

Even gold is behaving strangely. We hold it up as the ultimate example of a “safe haven” investment, and yet market structure shifts are calling that into question. Last week the gold price dropped almost 5 percent in one day, the largest daily fall in seven years, due to deleveraging pressure from derivative positions. And we tend to forget that gold fell almost 30 percent at the height of the 2008 market rout.  

Gold’s role as a safe haven is entirely based on narratives: that shiny and yellow are desirable qualities (surely that’s subjective?), that supply is limited (we don’t know that for sure) and that heavy is good (you’ll have heard the derogatory expression “such a lightweight!”). These days, heavy – as in very difficult to pick up and take with you – is perhaps not the indicator of utility it once was.

Even though we can all agree gold’s metallic properties are impressive, its position as the world’s safe haven is no longer universally unassailable, and through no fault of its own. The narratives around it are changing, and the resumption of the gold price rally at the beginning of the week seems less based on conviction the metal will hold its value in times of trouble and more of a desperate realization there’s nothing out there that can yet take its place.

Now, why so many narrative shifts all of a sudden? Actually, narratives are always changing – but the pace of change is usually much slower than what we are witnessing today. 

What we are witnessing is a breakdown of assumptions, in a time of fear. We’re worried about the economy, the banking system, the climate, living conditions, politics, education and the automatization of jobs. Add to that a growing feeling of vulnerability and concern about health and contagion.

In times of fear, we fall back on what we know, what we can be sure of. These days, that’s not much.

In his poignant 1944 paper called “The Social Psychology of Fear,” philosopher Kurt Riezler pointed out that “If we do not know the nature of a danger, we make an assumption. Without such an assumption, we cannot act.” 

But what are assumptions if not conclusions based on narratives? We assumed interest rates would never go negative. We assumed house prices would never go down. We assumed profits were a good thing, and social media would liberate us. 

So now, confronted by many dangers we are still struggling to understand, we are reaching for assumptions we no longer trust. 

Bitcoin’s narrative is changing, as is to be expected for such a young and complex innovation. But so are the narratives that guide just about every other aspect of investing. 

A few years from now, when the new narratives have settled into some semblance of normality, we’ll look back on this time and realize that the bigger story was in front of us all along.

Technical Indicators

Overall, the bias in prices is: Downwards.

Note: this chart shows extraordinary price action to the downside.

The projected upper bound is: 8,691.55.

The projected lower bound is: 7,097.76.

The projected closing price is: 7,894.65.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 22 white candles and 28 black candles for a net of 6 black candles.

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 20.9774. This is not an overbought or oversold reading. The last signal was a sell 3 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 32.68. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 26 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -190.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a buy 8 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 2 period(s) ago.

Rex Takasugi – TD Profile

FOREX BTC= closed up 54.820 at 7,909.890. Volume was 22% below average (neutral) and Bollinger Bands were 54% wider than normal.

Open     High      Low     Close     Volume___
7,853.3407,991.5007,814.8007,909.890 138,387
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 8,609.80 9,249.29 8,654.04
Volatility: 68 55 56
Volume: 315,948 241,533 124,866

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

FOREX BTC= is currently 8.6% below its 200-period moving average and is in an downward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of BTC= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on BTC= and have had this outlook for the last 18 periods.

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