Welcome back to BTCM Research, please consider subscribing to receive these posts directly to your inbox. All our content is still free. We have delayed any plans to charge for this critical content for the time being.
It's a new week and a new update on all our charts. A few questions were posed after last week, about our general Thesis, you can find our framework outline here. To summarize, 1) terminal deflation of the existing US Dollar system, 2) bitcoin expansion to take on the traditional fiat system, 3) end of the Chinese miracle, 4) spread of decentralized technologies, 5) bearish on the European Union.
Now on to the charts...
The bitcoin price is looking very strong. I want to encourage anyone reading this who wants more detailed analysis on macro topics stemming from bitcoin, including the dollar, gold, other currencies and global markets, check out the my member letter called the Bitcoin Pulse. A new issue is coming this week where I'll discuss many technical indicators in bitcoin as well as a rundown of important fundamentals. I also give a price target for bitcoin's next move. You can sign up at bitcoinandmarkets.com.
As you can see here, bitcoin is pressing up on its All Time High and ready to break out. Historically, when bitcoin is in similar patterns, a break out is highly likely.
Dollar Index (DXY)
Quickly jumping into the dollar we can see a near term breakdown in price below the April 2nd low. However, there is plenty of room and support before testing the March high seen on the left. The levels I identified last week of resistance around 94.5 and a massive wake up call when it breaks above 95 still stand. However, the dollar looks like it wants to take its time on the way to those levels.
We hear a lot about the commodities super-cycle turning bullish, but there is still little evidence of it. After the deflationary shock of 2020 and the ensuing supply shock it caused, we would expect prices of commodities to rally as they have done, because supply is dropping faster than demand. But for a sustainable long term bullish shift in commodities the global economy must be growing, not shrinking.
Monthly chart of the Goldmand Sachs Commodities Index (GSCI) as reminder of where we are:
The GSCI is the broadest commodities index we have, below the 4 hours chart shows it did not even reach the 2018 high. Recent price action looks to be in consolidation with resistance at 476. As the dollar continues to strengthen here and the global economy risks rolling back into severe recession in 2021, we should see commodities fall.
Gold continues to struggle but has put in a nice looking double bottom. The trend is still lower, with bulls having a lot to prove. That said, I won't be surprised with a move to $1780 prior to further downside. I'm still eyeing the $1500-$1600 range as the ultimate bottom within the next few months, then a rally to new highs.
Gold is not completely dead, but it is not something I would allocate capital to instead of bitcoin.
Silver is range bound between $21 and $30. That is a very large percentage point range, making silver very volatile. I haven't run the numbers but it looks much more volatile than bitcoin. I'm more bearish on silver as a monetary metal than gold, but think it could easily outperform gold in rallies because it is a more illiquid market. Short term, I don't have a strong conviction on silver either way, however, over the next year or two I do expect it to approach $100/oz.
I've written previously that $60 is a key price for US shale production. Most operations are profitable at that price and capacity that was taken offline in 2020 will slowly come back online. Therefore, I predict that it will be hard for oil to maintain $60 for very long.
Or said another way, if global supply chains for oil remain stable, crude should gently fall for the rest of the year. I say this knowing stability in the oil market is impossible, especially as the US withdraws influence as global policeman. There will be dramatic shakeups this year that will add some upward pressure to global prices, like the recent Suez canal debacle as the Ever Green blocked 10% of global oil distribution. Despite this the oil price still fell gently over that period.
I predict prices at least hitting $50/bbl by the end of the year, if not lower. I'll write a larger piece on oil this week, so be on the look out for that.
Lastly, I'll end with a quick update on US Treasury rates. The 10 Year Treasury yield peaked last week on the day I released my chart rundown. Since then there has been weakness in yields, meaning strength in the price of the 10Y. The trend may be changing as the steepness of the rise in yields has stalled for 2 weeks now and might be rolling over as we speak.
Lower yields would fit out thesis here as the global dollar shortage rears its ugly head once again.
There is nothing unusual about how the yield curve is acting right now. It has rebounded, but all many decade long trends are still intact. No sign of imminent danger of exploding rates or to the dollar financial system.
Bitcoin moving into the dollar's territory won't make the dollar inflate. As bitcoin gobbles up market share, less USD credit will be issued meaning dollar based growth suffers and supply of global dollars shrinks.
That's it for this week. Subscribe and share.
Enjoying these posts? Subscribe for moreSubscribe now
Already have an account? Sign in