Market Lab Report
by Dr. Chris Kacher
The Web3 Evolution Will Not Be Centralized™
Bitcoin all-time highs
Bitcoin has never reached new all-time high prices before the halving. The halving is on April 19. The digital currency has now hit a new all-time high in every currency in the world.
Four events led to Bitcoin's rise over the last year:
=In March 2023, the Fed had to inject QE to rescue major banks such as Silicon Valley Bank.
=In late Aug-2023, the court ruled in favor of Grayscale.
=In Feb-2024, the SEC approved the spot Bitcoin ETF.
=Since Oct-2023, global liquidity has been in a strong uptrend with a pause in Jan and Feb-2024.
Fund inflows are like we have never seen before. It makes 2020 look small because now we have institutional Bitcoin spot ETFs. Price will continue to catch up over the coming months. Historically, when these flows peak, Bitcoin continues to rise for another 2-3 months.
Longest inversion
The US Yield Curve (10-year minus 3-month) has now been inverted for 505 consecutive days or nearly 17 months, the longest inversion in history. Past inversions led to recessions typically within 6 to 12 months but this time, due to QE, the Fed can print money to postpone the recession. This props markets higher.
Indeed, fed pivot or not, liquidity is on the rise again. Overall liquidity, as defined by the Fed’s balance sheet, less reverse repos (RRP) less the Treasury’s cash balance at the Fed (TGA), has been rising since mid-2023, taking stocks with it.
Liquidity is also growing in terms of real rates and the money supply itself. In that sense, it’s no coincidence that gold is rallying to new all-time highs, just as the US monetary base is growing again. Welcome to QEInfinity.
In addition, manipulated inflation and jobs data give a rosier look than reality, but markets only care about perception. We also have the market being led by the fewest number of names of any bull market with much of the driving force in big tech which involves AI. The major averages S&P 500 and NASDAQ Composite are heavily weighted in these names.
AI is creating more utility at a far faster pace than in the dot-com bubble in the late 1990s where the tech was not ready for prime time. Today, countless companies and individuals are utilizing AI to boost efficiencies and profits. In other words, while the dot-com bubble went well beyond expectations, I would expect the size of the AI bubble to surpass that of the dot-com bubble before it clearly gets ahead of itself as is the case with all bubbles.
QEInfinity
Based on Ray Dalio's study going back several hundred years of long term debt cycles which typically last 75-100 years, we would normally be nearing the endpoint of this cycle. But bleeding edge technologies including AI and blockchain create huge utility which can postpone revolution and global war. That said, the world stands at a precipice as existing hot wars can spread in addition to the situation between the US and China being delicate. Tipping points abound.
Global debt continues to accelerate. In the US, the linear extrapolation shows the current $34 trillion in national debt rises to $50 trillion before 2030. The more likely exponential extrapolation suggests $70 trillion as debt tends to accelerate over time as the onerously growing interest payments start to eat into GDP. Meanwhile, Bitcoin remains at 21 million maximum though nearly 30% of Bitcoin or 6 million have been forever lost. Bitcoin is the hardest money ever created.