Market Lab Report / Dr. K's Crypto-Corner
by Dr. Chris Kacher
Quantum Poodles Bringing Billions to Blockchain™
Bitcoin/Ethereum Twin Paradox
Bitcoin surpassed $35,000 while ethereum blew beyond $1,000. These two coins represent two brilliant paradoxes. Why paradox? Because both should never have been allowed to reach such high levels of valuation based on the amount of bashing by the mainstream press and a number of notables including Warren Buffet and Jamie Dimon and less notables such as Nouriel Roubini and Peter Schiff. The amount of push back I received since I started buying bitcoin when it was priced in the teens is well beyond the push back I received in the early days of the internet which is an understatement. Suffice to say, everything happens for a reason; there are no coincidences, only experiences designed to help one learn and evolve for the greater good.
Indeed, such global pushback is a beautiful buy signal. Flat-earthers once ruled the planet through no fault of their own. But history rhymes and in today's world, the number of flat-earthers seems to only grow. These are the people who believe much of the hype the mainstream press feeds them. The legendary musician Frank Zappa once said the only thing more common in the universe than hydrogen is stupidity. I'd say on a holistic level, it's fear that drives the stupidity. (Hypocrisy is a close second.)
BTC $1 M
At around $35,000 Bitcoin currently has a valuation of $650 B (at the time of this writing). Once bitcoin's valuation exceeds $1.45 T, it will be more valuable than silver. Let that sink in. Then its next target will be gold at $12 T. At this valuation, one bitcoin will be priced at $650k to match gold's valuation.
While the Winklevoss twins predict bitcoin $500k, the $1,000,000 prediction I had on my slide for the keynote at the Geneva WealthTech event in November 2017 to an audience of top banking CEOs including the head of UBS Wealth Management and Saxo bank still stands. While I was prevented from giving this talk due to exogenous circumstances, one notable individual in the cryptospace recently gave an updated talk to a similar audience just recently. The genie is out of the bottle. There is now safety in numbers. So while the rabbit hole isn't just deep but also multidimensional, what doesn't kill you makes you more anti-fragile.
Here’s to the gifts that 2020 has brought:
=greater global debt
=higher bitcoin, ethereum, and altcoin prices
=exponential digital growth
=major tipping points
=regulators missing the #bitcoin boat in terms of having any chance to end it
Here’s to a multi-trillion $€£ bitcoin/blockchain space and 6-figure bitcoin in 2021, and 7-figure/11-figure bitcoin/blockchain valuations by Dec 2023. #DigitalIsEatingTheWorld
I believe bitcoin will overshoot $500k by 2x by end of 2023, then blow apart, correcting its typical -80%+, bringing the price back down to around $200k, at least for a little while, before it heads higher once again. Michael Saylor recently tweeted, "Money is flowing out of conventional assets into bitcoin due to the escalating risks of global currency devaluation, technology disruption, social dislocation, and political uncertainty. This is not a "rally" or "bubble" - it's a chain reaction spreading like a fire in cyberspace."
ETH has achieved the network effect when it comes to technologies building on its platform. ETH is the future of DeFi as the operating system for the financial world, an amazing (r)evolution. ETH is the future of the $1 Q(uadrillion) derivatives market. At nearly $1000 at the time of this writing, ETH has a valuation just over $100 B. This is a grain of sand that can become a big part of the beach given the size of the debt, equity, banking, lending, and derivatives markets whose markets together make up about $2 Q. $2 Q/ $100 B = 20,000. If ETH achieves just 0.1% market penetration, each ETH would be worth $20,000. Given its efficiencies and cost reductions, odds favor a market penetration of 0.5% or $100,000 by the end of 2021, barring crippling regulations of course.
The total value locked (TVL) in ETH's DeFi platforms is a minuscule $16 B. Expect it to grow by 100-fold over the next year, or $1.6 T thus the valuation of ETH itself will approach this value.
ETH also kills the near zero rates of interest banks give their customers. Currently, you can get no-risk 8% interest just by leaving your coins on the blockchain as they contribute to liquidity. You can also earn much higher rates of interest by lending them out. The space continues to grow exponentially so expect ETH to get there sooner than you think.
In looking at the parabolic moves of volatile ETNs like GBTC, I noticed that in big moves they go up 400% and then drop 50%, then repeat a 400% move.
GBTC is coming up on a 4x gain (as of 1-6-21) since the recent parabolic move started at 10. But, it now has a lot of institutional purchasers rather than retail purchasers (I assume) like GBTC in 2017-18 and JNUG in 2016-17. I saw how Dr. K recommended handling GBTC as it reached an ATH. What do you think about the presence of institutional investors and the likelihood of GBTC repeating its 2017-18 pattern?
Institutional investors are far more present now than ever before so the buying pressures on bitcoin and GBTC are heavy. GBTCs and ETHEs premiums can swing to extremes during such frothy periods which can last longer than anyone expects.
That said, expect sharp drops as a result of profit taking or a negative news event at some point as bitcoin often loses around 1/3 of its value in bull markets, though the supply of bitcoin this time is so scarce, bitcoin may only correct 20-25% instead of 30-40% in this bull run. In 2017, such price action was sometimes as short as one day so trying to time selling then rebuying whether it’s bitcoin itself or the highly correlated alt coins can be tricky at best. It is often better to use such pullbacks as buying opportunities as well as identifiers of weaker names in your portfolio which you would then sell at least half of the position, moving the capital into the stronger names.
Hopefully we get yet another major climax top in GBTC, bitcoin itself, and the alt coins as such tops have so far been part of each bubble cycle, ie, near the end of 2013 and late 2017. So yes, the rhyme of a bursting bubble perhaps around the end of 2021 will be observed in GBTC, bitcoin, and the alt coins. This time prediction is based on bitcoin's S2F, bitcoin price history, and a number of other metrics I use.Another point is that the lockup period in ETHE has been shortened to 6 months to equal that of GBTC which could reduce ETHE's large premium. This could account for the selling we saw on Monday despite the price rise in ethereum over the weekend. This is a red flag which should be monitored. While ETHE has outperformed ethereum in prior bull runs, you may want to eliminate this added volatility which can swing both ways due to these added layers of complexity regarding the premiums and lockup periods. You would then want to buy ethereum not through Grayscale but through a cryptocurrency exchange or through Paypal if you want to remove the counter party risk of trading on a cryptocurrency exchange.