National currencies fell, cryptocurrencies rose, and other asset classes were mixed. The week's biggest moves were all in commodities, as coffee lost 7.2% and copper gained 5.6%. Other strong performers were Ethereum and the HUI gold stocks, which added 5.1% each.

The US and Canadian Dollars led the way lower for the national currencies, falling 1.7% apiece. The Chinese Yuan outperformed, declining 0.6%, as did the British Pound Sterling (not in table) which gave up just 0.2%. Short term treasury notes moved in line with USD cash, dropping 1.7%, but long term treasury bonds rose 0.2%.

Cryptocurrencies had a fairly quiet week. Bitcoin peaked on Monday at 163.1 grams, then declined gradually to finish at 160.1 grams, up 0.4%. Ethereum hit it's high on Wednesday at 4.24 grams, and ended the week at 4.16 grams, up 5.1%.

Gold stocks dominated the equities, rising 5.1%. The only other index in the black was the S&P 500, which added 0.1%. The Japanese Nikkei dropped the most, giving up 1.0%. The Dow Industrials closed down 0.7%.

As mentioned earlier, most of the week's fireworks were in commodities. The metals were all up, led by copper and silver, which rose 5.6% and 2.4% respectively. Coffee dropped 7.2%, the week's largest loss, while crude oil fell 1.9%.

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Bonds and currencies (both national and crypto) fell, while equities and commodities were mixed but mostly higher. The largest gains were in coffee, which rose 5.3%, and crude oil, which added 4.1%. Ethereum fell 3.3%, the largest loss in the table for this week.

The Japanese Yen fell more than any other major national currency, declining 1.6%. The Chinese Yuan fell the least, giving up 0.1%. The British Pound (not in table) also outperformed, dropping 0.2%. The US Dollar lost 1.4%, as did its short term notes. Long dated treasuries fell 2.6%.

It is worth noting that in spite of their relative out performance, the Chinese Yuan and British Pound both made new all-time lows this week. And the Swiss Franc (not in table) came very close to a new low, and closed down 1.0% for the week.

Bitcoin traded between 161 and 163 grams for most of the week, then declined on Thursday and Friday to finish at 159.4 grams, down 2.2%. Ethereum also closed on the lows of the week, off 3.3%. Some smaller cryptos fell much more, however. For instance, DASH (not in table) ended down 7.4%.

Equities were a bright spot this week. The only falling index was the Japanese Nikkei, which closed down 2.5%. Gold stocks rose 2.6%, and the S&P 500 rallied 2.5%.

The week's largest gains were in commodities, as coffee surged 5.3% and crude oil rose 4.1%. The metals were divided as silver and platinum fell 0.4% and 0.3% respectively, while palladium gained 1.7% and copper added 0.1%.

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National currencies fell, but other asset classes were mixed. The largest gains were in gold stocks, which rose 4.3%, while the Dow Industrials took the largest hit, dropping 4.0%. Crude oil also fell hard, declining 3.9%.

The Canadian Dollar and Chinese Yuan dropped 1.8% and 1.7% respectively, the largest losses among the national currencies. The best performer was the Swiss Franc (not in table) which gave up 0.5%. The Euro declined 0.6% and the US Dollar closed off 0.7%. Short term notes tracked USD cash, declining 0.7%. Long term bonds rose 1.0%, putting them back in the black over the last year.

Bitcoin rose to a high of 170.3 grams on Monday, then declined through the week to finish at 163.1 grams, down 2.1%. Ethereum rose to a high of 4.29 grams on Tuesday, then settled back to close at 4.09 grams, up 0.4%.

Although the HUI gold stocks gained 4.3%, making them the week's best performing asset, all other equity indexes in the table ended lower. US stocks, including the Dow Industrials, which fell 4.0%, were among the week's worst performers. Among the major equity indexes, the Japanese Nikkei fell the least, giving up 0.9%.

Crude oil was the weakest of the commodities, falling 3.9%. Metals were mixed, as platinum and palladium fell 3.3% and 2.9% respectively, but silver gained 1.0% and copper added 1.1%.

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We all know that prediction is tricky job, especially when it concerns the future… and Bitcoin, being a relative newcomer on the monetary stage, is loaded with more than the usual number of factors that could render the most carefully crafted forecasts wildly in error. But I’m going to make a stab at it, anyway! Please keep in mind that these projections are for entertainment only. No actual statistics were killed or tortured in the making of this post. Read on to see where I think Bitcoin is headed.

First of all, please note that dollar prices will not enter much into these deliberations. In these times of unprecedented fiscal and monetary policies, unheard of debt levels, depression level unemployment and GDP collapse, the future value of the US Dollar, and of all national currencies, is in severe doubt. A short squeeze on the Dollar could drive it much higher against other currencies, and force liquidation of many assets including gold and Bitcoin to service and pay down debt, pushing it higher in terms of those as well. On the other hand, massive amounts of new fiat currency entering circulation could lead to much lower valuation of each currency unit when measured against gold and assets like Bitcoin. These are not the concerns of this analysis.

I will be concerned only with the ratio of gold to BTC, currently about 163 grams per bitcoin. If both rise or fall about the same amount when priced in USD, then the ratio will stay about the same. If the USD price of gold falls in half, but the USD price of BTC stays about the same, I will consider that Bitcoin has doubled in value, because you could sell one bitcoin and buy twice as many grams of gold with the proceeds, and so on. If the Dollar ceased to function, or even to exist, people would still be able to trade gold for Bitcoin and vice versa, and the relationships discussed here might still apply.

If you are unfamiliar with grams, and prefer to think in troy ounces, just divide the prices shown here by 31.1; for example, 163 grams (the current price of bitcoin) is a little over 5 ounces. 1000 grams, or 1 kg, is about 32 ounces. 10 kg is about 322 ounces.

Take a look at the chart below (click on the chart for a more detailed PDF version). My analysis starts by noticing the relative heights and timings of the highs in mid-2011, late-2013 and late 2017. The second peak is about 48 times higher than the first, while the third peak is about 17x the second. So the rate of growth in the peaks seems to be slowing.

Now look at the time between peaks. From the 2011 peak to the 2013 peak was 910 days, and from the 2013 to the 2017 peaks was 1,473 days, or 1.62 times as long. If that “time stretch” factor stays about the same, the next peak would occur about 2,400 days after the last one, putting it in mid-2024. This sets the timing for the arrow labeled “Next High?” on the chart. A “log log regression” of the price peaks gives the light green curve, and suggests the price we might see at that time is around 5 kg per BTC, a gain of about 3,000% from current levels.

Running a similar regression on the low points of the price series gives the light red line, marking the lower limit of the Bitcoin channel. Almost all of the Bitcoin prices observed since trading began lie between the red and green curves. In my model, prices near the red line represent buying opportunities, while prices near the green upper line represent selling opportunities. We are currently in "buy" territory, although it is possible that even better opportunities may lie just ahead.

Next, notice the distance between the red and green lines for any given date. In 2011, the upper bound was about 84x the lower bound. A year later, the ratio was 47x. By 2015 it was 22x, and at the start of 2020 it had fallen to 12x. This is a good thing, demonstrating a decline in overall peak-to-trough volatility. If this pattern holds up, the ratio will be about 9x in mid 2024, and about 6.5x by the end of the decade. Still high by forex and bond standards, but less than 10% of the 2011 volatility!

There is another way of estimating the timing of Bitcoin highs. Many observers think that the booms and busts of Bitcoin are driven by the halving events that occur about every 4 years. Past halvings occurred in 2012, 2016, and 2020. the next one will be in mid-2024. These events, hard-coded into the Bitcoin software, cause a reduction in the reward miners are paid for running the network and certifying the blockchain’s integrity. Because miners always have a choice between paying to run their mining computers and just buying bitcoins in the open market with the money instead, these events do have a fundamental impact on the BTC price. Although there is a steep and sudden change in the mining reward, the BTC price doesn’t change suddenly because there is no surprise involved — the timing of these events is known to all the participants well in advance.

After some delay, the BTC price has moved to a new high following each halving so far (or more precisely, a peak occurred before each halving, dipped around the time of the halving, and then rose to a new high, starting the cycle over again.) Looking at the time difference between the peaks and the following halvings we see 539 days between the mid-2011 and late 2012, 948 days between late 2013 and mid-2016, and 877 days between late 2016 and mid-2020.

Things were still pretty wild and woolly, changing fast in 2011 and 2012; but the last two cycles are each about 900 days from peak to halving. If that holds true in the next cycle, we might expect a top in late 2021. This defines the timing of the arrow labeled “Halving High?”. The corresponding price target would be about 2.2 kg.

Interestingly, the halving-based timing model suggests that mid-2024 (the next halving) should see prices near the lower limit (0.6 kg). This is the exact opposite of the prediction of the time-stretch model, which predicts a price near the high limit (4.9 kg)!

I won’t attempt to reconcile these forecasts for now, but it will be very interesting to see how things play out over the next few years. My personal guess is that the halving effect will dominate; we will see lower prices through the summer of 2020, rising through the fall and winter, then accelerating to a new high by the end of 2021, corresponding to the “halving high” model, but this could just be wishful thinking on my part. The results of the November elections in the US, and the economic response to the ongoing pandemic are among many factors that could upset this cyclic analysis.

Over the longer term, as the halvings result in smaller and smaller changes in the rate of creation of new bitcoins, and the market for Bitcoin becomes saturated, its price will stabilize.

One final comment: As I was preparing this forecast, I began to wonder how reasonable these price targets were, in some real world sense. As a sanity check, I decided to compare the value of all bitcoins (21 million will be eventually mined) to the value of all the gold in the world.

According to the World Gold Council, the total above-ground stock of gold, including jewelry, private investment, official holdings, and other forms, as of end-2019, was 197,576 tonnes. One tonne is 1000 kg, so total above-ground gold could be stated as about 200 million kg. Since there will be roughly 20 million bitcoins, it is fair to say that at a price of 200/20 = 10 kg per BTC, the total value of all bitcoins would be roughly the same as all the above-ground gold. The 10kg (10,000 gram) level is the top of the price chart above.

If this model holds, by the end of the decade the total value of Bitcoin should be cycling around the total value of gold, from about one-third the value at lows, to twice the value at highs. I know of no particular reason why Bitcoin shouldn’t be much more valuable (or much less valuable) than gold, but I find the possibility of converging on equivalence interesting.

Please let me know your thoughts in the comments below, or by email to [email protected].

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This week cryptocurrencies fell, stocks moved higher, and national currencies and commodities were mixed. Bonds were little changed. The largest gains were in crude oil, which rose 9.5%, recovering much of the prior week's 11% loss. Ethereum fell the most, dropping another 4.4%.

The Japanese Yen outperformed other national currencies, rising 0.3%. The weakest major currency was the British Pound (not in table) which fell 1.5%, followed by the Euro, which closed down 0.6%. The US Dollar and short term treasuries declined 0.1%. Long term bonds closed unchanged.

Ethereum prices worked slowly lower until dropping sharply on Friday to close at 4.07 grams, down 4.4%. Bitcoin rose to 172.5 grams on Tuesday, then declined slowly at first, and rapidly on Friday, to finish the week at 166.5 grams, off 2.1%.

Stocks all traded higher, led by the S&P 500 and the HUI gold stocks, which rose 1.8% each. Laggards were the Dow Industrials and the Nikkei index, which added 1.0% apiece.

Crude oil rebounded strongly, gaining 9.5%. Cotton was also higher, adding 2.8%. Precious metals fell, as palladium dropped 2.5% and silver declined 0.6%. Copper bucked the trend in metals, rising 0.4%.

Gold stocks are now the only asset class in the black from one year ago, up 14.8%. Crude oil is down 42.7% over the same period.

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What goes up must come down… this was a very rough week, leaving only long term treasury bonds in the black, as the TLT bond ETF rose 1.0%, while all other assets declined. The largest losses mirrored the prior week's largest gains: crude oil fell 11% and European stocks fell 8.8%. UK stocks (not in table) did even worse than their European cousins; the FTSE dropped 9.9%.

The Chinese Yuan outperformed other national currencies, falling just 0.5%. The Yen also did well, giving up just 0.7%. Hardest hit were the Canadian Dollar, which fell 4.3%, and the Euro, which dropped 3.5%. The US Dollar declined 2.9%. US short term treasuries did slightly better, falling 2.8%. Long term bonds were the only rising asset this week; TLT gained 1.0%.

Bitcoin prices were fairly stable until dropping on Thursday to a low of 188.8 grams, then recovered to close the week at 170 grams, off 4.7%. Ethereum followed a similar course, with a low of 4.15 grams and a decline of 4.4%.

Gold stocks declined 2.6%, the best performance among the equities. The European STOXX index fell the most, giving up 8.8%. US stocks were not far behind, as the Dow Industrials dropped 8.3%. Although not in the table, the UK FTSE actually under-performed even the STOXX, sliding 9.9%.

The week's biggest decline was in crude oil, down 11.0%. Copper outperformed other commodities, closing down 1.2%. Precious metals did relatively well, as silver declined 2.6% and palladium slid 2.6%.

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I have recently received some calls and emails asking me to update my long term stock price charts… because they don't show "Great Depression" price levels. Well, I can assure all who are wondering about it that they are indeed up to date. Let's take a look at some low points in past stock index prices, with a focus on the S&P Composite as compiled by Robert Shiller. This data is based on monthly averages, converted from US Dollars to grams of gold.

Click on the chart to download a pdf.

The lowest low in his series occurs in June of 1877 when the S&P hit 3.7 grams. The next lowest point is in January of 1980, at 4.1 grams. The third lowest in August of 1896 at 5.7 grams. And the fourth and fifth lowest points early and late in the Great Depression, June of 1933 and April of 1942, 7.2 grams and 7.0 grams, respectively.

Honorable mention goes to the low of the recession of 1973-1974, 11.2 grams (basically the start of a bull trap embedded in the 1970's bear market) and to the post financial crisis low of 2011 at 20.3 grams.

So where are we today? The most recent daily low close was on 23-Mar-2020 at 45.6 grams. The latest close, 12-Jun-2020, was at 54.6 grams. Unlike the S&P's dollar price, which is near its all-time high, its price in gold is far below its all-time high of 173.1 grams (68% below!)

Obviously, we are a long way from Great Depression price levels, and even farther from making new all-time lows. But that doesn't mean that they may not be in the cards eventually. As you can see, prices below 10 grams come along fairly frequently, and occasionally those levels last for years. I would not rule out a 60% to 80% or even a 90% drop in prices from current levels as this recession plays out… especially if the run from 2011 to 2019 turns out to be a massive bull trap echoing the rally of 1975 and 1976 (where dollar prices also returned to near all-time highs).

Keep in mind that dollar prices for stocks could continue to rise to new highs, but if the value of those dollars collapses, we could still see new lows for stocks when priced in gold.

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Another generally higher week; the only losses were in long term bonds, which fell 1.9%, and gold mining stocks, which dropped 1.8%. Euro stocks and crude oil led the rally, gaining 14.5% and 14.4% respectively. Ethereum was also a strong performer, rising 12.2%.

National currencies were all in the black, with the Canadian Dollar and Euro leading the way. The CAD closed up 5.8%, and the EUR gained 4.4%. The Chinese Yuan and Japanese Yen under-performed, adding 0.7% and 0.8% respectively. US Dollar cash rose 2.7%; its short term notes gained 2.6%, and its long term bonds fell 1.9%.

Bitcoin spiked higher on Monday, reaching 182.7 grams, then gave up all those gains on Tuesday before working gradually higher through the rest of the week to close at 178.6 grams, up 5.2%. Ethereum peaked on Thursday at 4.47 grams, then settled back to end the week at 4.46 grams, up 12.2%.

Gold stocks fell 1.8%, but all other major indexes rose. The Euro STOXX50 led by a wide margin, gaining 14.5%. The Dow Industrials, in second place, gained 9.7%. The Nikkei under-performed other major indexes, adding 5.3%.

The whole commodity complex moved higher, led by crude oil, which closed up 14.4%. Cotton was also strong, adding 10.2%. Platinum and silver were the weakest commodities, gaining 2.4% and 2.6% respectively.

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Another mixed, but generally higher week. The largest gains were in the Euro STOXX50 and the Japanese Nikkei, which each rose 7.3%. In second place was crude oil, which added 7.0%. The worst losses were in coffee, which fell 6.8%, and gold mining stocks, which dropped 3.9%.

China's Yuan declined 0.2%, and Japan's Yen closed unchanged, but all other national currencies moved higher. The largest gains were in the Euro, which rose 2.4%. The Canadian Dollar also had a good week, rising 1.8%. The US Dollar added 0.3%, as did its short term notes. Long term bonds fell 0.9%.

Cryptocurrencies had a good week, as Ethereum rose 6.8% and Bitcoin gained 3.1%. Both fell early in the week, then recovered to close higher. I am writing a more detailed post on Bitcoin and its future, post halving. You can see some of this work in my updated Bitcoin long term chart.

In the equity space, only gold stocks closed lower, falling 3.9%. Japanese and European indexes rose strongly, gaining 7.3% each. In the US, the S&P 500 added 3.3% while the Dow Industrials rose 4.0%.

Most commodities moved higher this week, led by crude oil, which closed up 7.0%. The only losers were coffee, which fell 6.8% for the largest loss of any asset this week, and platinum, which pulled back 0.9%. Silver was the second-strongest performer in the commodity group, rising 3.8% to close at 316 mg/oz.

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Every asset category was mixed, but mostly higher this week. The largest gains were in crude oil, which rose 12.8%, and platinum, which gained 8.8%. The worst losses were in gold mining stocks, as the HUI index fell 3.9%.

Last week, many national currencies, including the Euro, Swiss Franc, Chinese Yuan, British Pound and Canadian Dollar closed at new all-time lows. This week, the Swiss Franc and Chinese Yen fell further to make new lows, then recovered along with the others. The Euro lead the way higher, finishing up 0.8%, followed by the British Pound (not in table) which gained 0.6%. The Chinese Yuan was the weakest currency, falling 0.8%. USD cash and short term notes rose 0.1%; long term bonds were off 0.6%.

Bitcoin rose to a high of 174.4 grams on Monday, then pulled back, finishing the week at 164.8, down 1.5%. Ethereum advanced to a high of 3.85 grams on Monday, but settled back to close at 3.72 grams, up 6.0%.

Gold stocks fell 3.9%, but all other major markets moved higher, led by the Euro STOXX 50, which closed up 5.8%. The UK FTSE 100 index (not in table) rose 4.0%, while the S&P 500 rose 3.3%, and the Japanese Nikkei gained 1.7%.

Crude oil continues to recover, rising 12.8% this week, but at 597 mg, it is still below its 2016 low of 660 mg. Platinum also performed well, gaining 8.8%. The largest commodity losses were in Coffee, which declined 2.9%.

I have had requests to update the long term chart of the S&P Composite based on Shiller's data from his book, Irrational Exuberance. I have done so, as a logarithmic chart that more clearly portrays price changes, especially for the earlier decades. You can view the chart here. On this log chart, each major division of the price axis represents a doubling (when rising) or a halving (when falling). This allows direct comparison of price movements in percentage terms, even at very different price levels.

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