by Dr. Chris Kacher
BTC hits all-time highs
BTC hit new highs, just piercing it's old high of 69,000, then sharply reversed because the market was too long-heavy resulting in the highest number of liquidations over the last 6 months. It then had a powerful bounce as it made another attempt to definitively break through 69,000. Watch for a definitive move above 69,000 for a buy point. And every 10,000 crossed definitively also can be bought, so perhaps a clear move above 70,000 can be used as one's entry point. ETH meanwhile hit new 2-year highs.
Why this crypto bull mkt is truly one of its kind:
=BTC spot ETFs act as a major demand driver
=Emergence of a new category of investors: major institutional funds are actively deploying
=3/4th world holding elections which means easy money policies
=Staking/re-staking various major cryptocurrencies such as ETH which serve as a major supply sink
=Bitcoin halving which will reduce daily supply by 1/2
But do not get caught up in the FOMO. Always know your exit points because crypto markets can become especially frothy.
Ethereum (ETH) upgrades coming
BTC had a major breakout on Feb 7 that we anticipated in a report we sent on GBTC just before it broke out. Typically, BTC outperforms in the early stages, then ETH overtakes, then altcoins follow. Should the uptrend in BTC continue, expect ETHBTC to trending higher with the leading altcoins outperforming both though this process can take weeks to unfold.
ETH's eventual outperformance will be spurred by a few factors:
- ETH's Dencun upgrade on 3/13/24 will help Ethereum compete in terms of scalability with faster chains in the Smart Contract Platforms Crypto Sector, such as Solana.
- ETH is now net deflationary due to its upgrade on 9/15/22 "The Merge" when it became proof-of-stake, so its circulating supply will continue to decrease over time.
- ETH network revenue generation was $2 bil in 2023. This creates a flywheel that drives value to ETH which increases its network security. ETH towers as the most secure and trusted smart contract platform as well as the largest in market cap by far. Solana (SOL) by contrast only generated $13 mil in fees in 2023.
- An SEC decision regarding spot Ethereum ETFs from Blackrock and VanEck is due May 23. The odds of approval have greatly increased since the Bitcoin spot ETFs were approved.
Federal debt refinancing costs
More than 30% of all US federal debt is set to roll over in 2024, or over $7.5 trillion. The refinancing cost of this debt is the worst it has been in more than two decades due to interest rates having risen at the fastest pace on record from near zero levels. While rate cuts have been expected, they have been postponed due to inflation that is staying at higher than expected levels for longer. This means rates will also stay higher for longer. CME FedWatch which had originally priced in 7 rate cuts for 2024 now only prices in 3 rate cuts. And should future measures of inflation such as the CPI, PPI, and PCE continue to come in ahead of estimates, expect the first rate cut to get postponed again and the number of rate cuts to shrink.
Core PCE matched estimates at 0.4% in January which shows that falling PCE since 2022 has found a floor and is now moving sideways.
The Fed remains in a tight corner. If they keep interest rates high, they may push the US economy into a recession, but if they cut interest rates, they risk inflation coming back. Meanwhile, Americans are seeing 40% of all personal income tax dollars spent on servicing the debt instead of having those dollars devoted to better R&D, education, defense, and infrastructure, among other things. The money gets created via stealth QE as interest payments. This is true for other major governments. A vicious circle is created wherein as debt rises, so do interest payments on that debt which forces central banks to create fiat which in turn devalues the fiat. And history shows money supply never materially decreases but only increases over the long run which is why fiat currencies degrade over time. And while money supply M2 decreased since 2022 as the Fed tightened their balance sheet, stealth QE has increased since 2023 to outweigh the Fed's tightening.
This is also why stocks, real estate, and other hard assets tend to rise over time despite some rare setbacks such as the depressionary 1930s. Bitcoin should lead in terms of price appreciation as it is a measure of value against fiat that inevitably degrades.
Even before QE was launched in late 2008, fiat has always degraded over time. In these dollar purchasing power charts that show how the dollar has lost value over the last century, they always show a linear y-axis so it appears the dollar is falling less quickly over time. But on a log plot, it shows the devaluation of the dollar has accelerated. COVID was a big catalyst.
Crypto picks list
Our crypto picks list continues to outperform. Four of the names (Tickers: FET, DAG, TAO, RNDR) are AI-crypto related as I have and continue to believe AI will outperform. Right now, AI crypto companies represent less than 1% ($24 B) of the total crypto market cap ($2.6 T) so there's tons of room to grow. NVDA is also having it's AI conference on March 18. One of our crypto picks, RNDR, is scheduled to speak. That said, such a hot group can overheat a number of times with punishing short-term corrections as it moves higher. Depending on your trading style and timeframe, use the appropriate moving averages to gauge your entries, add points, and exit points.