National currencies and bonds continued to fall, with currencies hitting new all-time lows across the board; stocks, cryptocurrencies and commodities were mixed. The week's biggest gains were in silver, which continued its massive breakout by rising 13.9%. Ethereum was in distant second place, adding 6.2%. The largest losses were in coffee, which fell 6.1%, and copper, which closed down 5.8%.

Every national currency I track, from the Aussie Dollar to the Russian Ruble, made a new all-time low this week, mostly on Thursday. Hardest hit was the Chinese Yuan, which changed hands on the Shanghai Gold Exchange for 2.24 mg, a drop of 4.6%. The Ruble (not in table) outperformed its peers by falling just 2.6%. The US Dollar was down 3.3%. Short term notes traded in line with cash, but long term bonds fared worse, dropping 3.8%.

Bitcoin started the week strongly, hitting a high of 186.1 grams on Saturday the 1st, but pulled back to 175.0 grams before closing at 177.7 grams, off 0.9%. Ethereum hit its high of 6.14 grams on Monday, then worked lower to close at 5.81 grams, a gain of 6.2%. Some smaller cryptos did much better; for instance DASH (not in table) rose 13.6%, and Monero (not in table) gained 11.7%.

Among the equity markets, the Dow Industrials were king, outperforming its peers by eking out a 0.4% gain for the week, making it the only major equity index in the black. The HUI gold stocks underperformed, falling 3.2%. The S&P 500 lost 0.9%.

Volatility was concentrated in the commodities, as silver rallied 13.9% for the week's biggest gain, the only gain in the commodity complex. Coffee fell 6.1% for the largest loss, but copper was also hit hard, falling 5.8%.

Looking back over the last year, silver is now the best performing asset, rising 24.9%. Ethereum is close behind, up 21.1%. Gold stocks, despite their poor performance for the week, are still the 3rd best performer on the one year time scale, with a gain of 18.1%. Crude oil still shows the largest loss, down 40.2% for the year.

Click for PDF version

National currencies, stocks and bonds continued to decline, while cryptocurrencies soared and commodities were mixed. The week's biggest gains were in Ethereum and Bitcoin, up 19.8% and 14.9%. The largest losses were in palladium, which fell 8.5%, and the Nikkei 225 index, which closed down 7.5%.

National currencies all moved lower, led by the US Dollar, down 3.2%. The best performers were the Euro, off 1.5%, and the Swiss Franc (not in table) which slid 1.8%. Bonds also fell, with the short term SHY dropping 3.1% and the long term TLT declining 2.5%.

Cryptocurrencies were broadly higher. Bitcoin, the oldest and largest, climbed throughout the week finishing at 179.3 grams, up 14.9%. Ethereum, the second largest, gained 19.8%. Bitcoin continued to climb over the weekend, then saw a "flash crash" rumored to be caused by a billion dollar short sale in the futures market, but quickly rallied back to the 178.6 gram level, about where it closed on Friday.

Stocks were all lower, led by the Nikkei 225, which dropped 7.5%. The Euro STOXX fell 5.8% and the S&P 500 sank 4.4%. Gold stocks outperformed, giving up just 0.6%. On a year over year basis, gold stocks have far outpaced all other assets, rising 27.8%.

Aside from cryptocurrencies, the commodity sector provided all the week's gains. Coffee rose 6.2% and silver added 3.7%. But the sector also had the largest loss, as palladium fell 8.5%.

Click for PDF version

Filed under Bitcoin by  #

National currencies and bonds fell hard, and equities (other than gold stocks) moved lower. Cryptocurrencies and commodities were mixed. The week's biggest gains were in Ethereum and silver, up 14.0% and 11.5%. The largest losses were in cotton, which fell 7.8%.

National currencies were hammered hard this week. Almost every currency I track is at new all-time lows, including the USD, EUR, CNY, CHF, GBP, CAD, RUB, and ARS as well as the SDR. The only exceptions are the JPY, which sits just 1% above its all-time low, set on 21-Jan-1980, and the CLP and AUD, which are about 2% above their all-time lows set in April of this year. On a weekly basis, the US Dollar was hardest hit, dropping 5.0%. The Euro and British Pound (not in table) outperformed their peers, falling 3.3% and 3.1% respectively. Short term treasury notes dropped 5.0% (in line with USD cash) while long term bonds declined 3.3%.

Bitcoin rose to a high of 159.9 grams on Wednesday, but fell sharply on Friday to close at 155.9 grams, off 1.0%. Ethereum was relatively flat until Wednesday, when it started rising rapidly. It finished the week at 4.57 grams, up 14.0%, the best showing for any asset in the table.

Gold stocks rose 2.1%, but all other major equity indexes fell, led lower by the Dow Industrials which finished down 5.7%. The smallest drop was in the S&P 500, off 2.4%.

As usual recently, much of the big price action was in the commodities. Silver rocketed higher, gaining 11.5% and breaking out of its long term downtrending channel. Platinum also rose strongly, gaining 6.7%. Cotton saw the largest decline, falling 7.8%. Copper and crude oil also fell, closing 5.4% and 3.3% lower.

Over the weekend, national currencies continued to fall while cryptocurrencies gained ground.

Click for PDF version

Stocks moved higher, cryptocurrencies pulled back, and other asset classes were mixed. The week's biggest moves were once again in commodities, as coffee rose 4.8% and cotton fell 3.9%. Other strong performers were palladium, up 3.8%, and the Euro STOXX, which gained 2.9%.

The Chinese Yuan gained 0.8%, and the Euro added 0.7%. The largest losses were in the British Pound (not in table), down 1.2%, and the Japanese Yen, off 0.6%. The US Dollar lost 0.2%, as did its short term notes. Long term treasury bonds were unchanged.

Bitcoin declined through the week to a low of 157.1 grams on Thursday before reversing course and closing Friday at 157.6 grams, off 1.6%. Ethereum worked it's way lower all week, ending at 4.01 grams, down 3.6%. Both cryptos were rising over the weekend.

Equity markets were all in the black, led by The European STOXX50, which rose 2.9%. The Dow Industrials were in second place, gaining 2.0%. The S&P 500 lagged behind other major indexes, adding 1.0%. Gold stocks closed 1.8% higher.

Commodities were all over the place… Coffee climbed 4.8% (the week's biggest gain) while cotton fell 3.9% (the week's largest loss). Palladium and silver rose 3.8% and 1.8% respectively, but platinum fell 1.5%. Crude oil and copper were little changed.

Looking back over the last year, only a few assets are in the black. Far and away the strongest are the HUI gold stocks, up 19.4%. The other gains were much smaller: palladium is up 2.5% and the TLT long term bond fund has risen 0.5%. The largest losses were in crude oil, down 44.2% and Bitcoin, off 26.3%, closely followed by coffee (down 25.7%) and the Canadian Dollar (down 25.0%).

Click for PDF version

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%.

Click for PDF version

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%.

Click for PDF version

Filed under monetary universe by  #

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%.

Click for PDF version

Filed under monetary universe by  #

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].

Filed under monetary universe by  #

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.

Click for PDF version

Filed under monetary universe by  #

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%.

Click for PDF version

Filed under monetary universe by  #