New Government is Needed

Someone sent me this piece, which makes a similar argument that I made earlier today:

we have a political problem. Solutions such as blockchain can form the basis of a new monetary system, but getting their is a political problem. Relying on the technology is destined for failure because the politics are not solvable by technology.

What Canada Means for Crypto: What Canada Means for Crypto

Imagine you donated C$50 to the Freedom Convoy before it arrived in Ottawa, an action Trudeau has retroactively decided disqualifies you from participating in modern society. (This is not a hypothetical, at least if this Canadian Member of Parliament’s tweet is to be believed). Your bank accounts have been frozen, credit cards canceled, and access to your brokerage account denied. Further, imagine you have accumulated some Bitcoin in a cold storage wallet (i.e., on a flash drive in your possession), carefully ensuring that it is outside Trudeau’s reach. How are you going to pay your mortgage, car payment, tuition expenses, or buy groceries with it? The answer is you can’t. Does that wallet represent a store of value that might be reactivated in the future should the government change its stance towards you, or is itself changed altogether? Absolutely. Does it represent a practical medium of exchange, one that is useful during this personal crisis? Absolutely not.

Unfortunately, we must also admit the same analysis holds true for gold, a conclusion that runs opposite to our previous thinking on the topic. However effective gold might be as a store of value, if the only available functions during a time of personal crisis are to facilitate bartering or fleeing, it isn’t money. Gold bugs and crypto advocates alike should be aghast at what Trudeau has done and at what those in the US Treasury undoubtedly have in store for Americans.

And therein lies the critical conundrum: alternative forms of money require a benign government to allow for their proliferation, but a benign government negates the need for alternative forms of money. This is a political problem, and no amount of Bitcoin or Gold Eagles will help when the political eye turns against you. Money is what the government says it is, and we just got a glimpse that our views – political, cultural…personal – form a relevant condition to being allowed to spend it.

Is Satoshi in Court?

All I'm going to say about this is I see a non-zero probably that he might be Satoshi, and the expected move in the crypto market multiplied by that very tiny probability is a big number. If you wanted to hedge you could buy BitcoinSV symbol BSV, or look at shorting BTC, or via various stocks such as COIN and MSTR. The chart of BTC is making me somewhat bearish on crypto here as well, not enough to take a position yet. BTC met resistance at the March 2000 trendline again. I do own some BSV.

Coindesk: Kleiman v. Wright: Bitcoin’s Trial of the Century Kicks Off in Miami

BSV Blockchain Fees Exceed Block Subsidy

When I looked into cryptomining as a business, the one fear I had was what happens when the block subsidy fades? Fees are very small compared to the block subsidy (the issuance of coins for mining a block). I was excited by the BSV fork of Bitcoin because it was aimed at growing fees by supporting business deevlopment. And now, fees exceeded the block subsidy for the first time. It was only one block so far, but eventually this will be regular. It means BSV is well on its way to generating enough economic activity such that mining will be a sustainable business. It also speaks to the thriving businesses on the chain. This is an historic moment.

Imminent Bear or Topping Process

Three charts today. I remain bearishly oriented, but right now my largest trading position is a huge one in XLE call options. I expect a further bounce. That said...I don't know if it will be a brief relief rally before more selling or a larger rally that sets the market up for a bigger decline into the more seasonally bearish September.

BTC is approaching my support line. The break below $30k is important, but through support is when selling accelerates. BTC is less correlated with financial markets. I'm agnostic on the short-term, but still expect a break of support.

Next up is the imminent correction chart. Best expressed by SPDR Materials (XLB). We get a bounce up that fills the gap on various charts, followed by a swift decline. If this plays out, this rally will burn out today or tomorrow. This would also be better for the bulls because it might mean we get a summer correction, albeit a deep one, instead of a bull market top.

Finally, the larger topping process can be best shown with SPDR Energy (XLE). It could form the right shoulder of a head-and-shoulders topping pattern. This is highly speculative, but a "top" for the shoulder could come sometime after mid-August, with a break of the neckline coming sometime in late September out to mid-October, give or take a few weeks. This would likely coincide with the "end" of the bull market. End it quotes because who knows if we'd get another March 2020 style panic and stimulative rebound, or if it would be more like a 2000 repeat. For the latter, tech peaked in March 2000 and the rest of the market hung on until in September. Parts of tech such as ARKK and Tesla peaked back in February. Another intereseting corrolary, but not as important, is the strength in natural gas.

Summer Meltdown Delayed

It's taking longer than anticipated as it always does, but the picture remains bearish across many asset classes.

BTC Still on Schedule

Symmetry still holding up. Normally, I do not expect technical analysis to work like clockwork, particularly with government and central bank intervention going on. Cryptos are a retail-heavy free market though, which translates into a market more emotionally-driven. Technical analysis is ultimately human psychology in action. Counting from when the left shoulder began to form (broke through the neckline) to when it broke higher and began forming the "head" of this head-and-shoulders pattern, I count 39 bars. A perfectly symmetrical breakdown would occur on June 27.

I only point out the symmetry as a curiousity. I'm unaware of any technical value in it, what's more meaningful is the height of the shoulders are of similar size.

In any event, I expect BTC will break lower by early July. I expect a rapid and sizable decline after $30,000 falls. I have accumulated out-of-the money July puts on MSTR, COIN and SQ.

BTC Breaks Down on Friday

Update: The SEC punted on a Bitcoin ETF decison. Maybe.

Bloomberg: Why a U.S. Bitcoin ETF Could Be a Real Thing in 2021

On June 17, the SEC will decide whether to approve, disapprove or further investigate the structure.

The very symmetrical structure of the topping pattern in BTC made me check how many days it took the shoulder to form. A perfectly symmetrical shoulder would break through the neckline on June 22 June 27. Also notable, Bitcoin peaked coincidentally with the Coinbase (COIN) IPO. That happened because traders bought BTC ahead ofi the Coinbase IPO expecting a pop. If they did that again ahead of the SEC's June 17 decision, they will be selling the news again no matter if good or bad. Finally, the right shoulder looks weak, indicating to me it could break sooner rather than later. I took bearish positions on related stocks on Friday and may add more this week.

Treasuries Trying a Breakout

Bitcoin versus inverse TLT

Taleb and Roubini to Speak at Coingeek Conference

Bitcoin sceptics Nouriel Roubini and Nassim Nicholas Taleb join speakers’ roster at CoinGeek Zurich

Discussion topics will include but not limited to:

What currently drives market value of BTC vs what should drive real value of a digital asset

Does the market correctly consider the real utility of a blockchain or its native token(s)

How should actual utility influence the market price of a blockchain’s token

How should scalability of a blockchain influence the market’s valuation

Nassim Nicholas Taleb: “I had hoped bitcoin would be a currency that could be transacted with but BTC has turned out to be too volatile and thus a speculative tool, so I look forward to sharing my thoughts and discussing further on this roundtable panel.”

Nouriel Roubini: “I think calling cryptocurrencies a currency is a misnomer. The question is if Bitcoin is an asset and if cryptocurrencies can have real utility? I am happy to discuss this further look forward to discussing this at CoinGeek Conference.”

I am surprised to see Taleb using the trading symbol, BTC, instead of Bitcoin. Taleb had said in February that he was selling his BTC because of the volatility, and he has called it an open Ponzi. He also recently had a spat with BTC holders over whether it was following the Bitcoin white paper or not.

Bitcoiner Max Keiser Debates with Nassim Taleb Regarding Bitcoin White Paper

The crux of the debate between BTC and other chains such as the Bitcoin fork BSV, is about what the digital money should do. BTC limits the number of transactions via the size of its blocks and thereby moved towards a "digital gold" model where the coin has a very high value. BSV moved in the opposite direction towards unlimited blocksize. BTC is the digital equivalent of gold because it is very slow and expensive to transact. BSV is akin more to high-frequency trading, aside from potentially saving businesses and consumers billions in fees collected by payment networks such as Mastercard and Visa, it also allows for future applications in data markets and new economies.

I discussed why I believe BSV's model is the future in: Using Bitcoin for Censorship Resistant Communication

My most recent post on Bitcoin, more BTC price focused is here: BTC Waterfall Decline Approaches

As I expected would happen with a BTC sell-off, BSV went down with it. It bounced off long-term support, but I believe that will break when BTC heads towards $20,000 and potentially lower prices.

I see long-term support around $50 if BTC goes into a major bear market. I will be keeping an eye on the BSVBTC ratio if that happens. For now, BSV has not broken down relative to BTC. Volume is collapsing in the crypto market though...

If this ratio is rising in a bear market, I will be aggressively buying. If it dips along with BTC, I will probably wait longer because it will indicate the whole market is getting blown out. I expect 90 to 99 percent of the crypto market will disappear in major bear market. The survivors will eventually generate returns that will mirror the gains in BTC and Ethereum over the past decade. The corrollary is the doctom bubble versus the survivors such as Amazon and startups such as Google, Facebook and Netflix.

Finally, BTC looks like it could be ready to collapse as soon as this week given the drop in volume:

BTC Waterfall Decline Approaches

My first target for this BTC bear market is $20,000, with a firmer bottom in the range of $12,500 to $14,000. There was support at the $30,000 level, but I think this is a bigger move. BTC has already failed at former support,now resistance at $42k.

I am not shorting BTC. I'm more interested in BTC secondary plays such as MSTR and RIOT, but what I'm really looking at is BTC as a thermometer for speculation and what that implies for stocks. Tertiary plays such as Nvidia and beyond in the Nasdaq, such as Apple and Amazon.

On to the charts. Here's BTC. Everyone was focused on $30k support for good reason: the vast majority of BTC buyers via the market this past year have bought above $30k. Volume in Q1 was 267 million and Q2 is already 159 million BTC. That makes for 426 million transactions above $30k. I have to go back to the 2017 Q4 peak in BTC to accumualte enough volume to exceed what has traded since December. More than half of BTC buyers over the past 3 years paid more than $30k.

Both the chart pattern price support levels are simialr to the 2017 top.

The 2017 peak was in the context of a bull market in financial assets. BTC have never existed during a broad bear market. If BTC can go lower, let's look at the volume profile for a clue. Below I show the 3-, 5-, and 7-year time frames.

Lo and behold, the volume profile corroborates the green horizontal I have on the chart. There is strong support between the green and violet horizontals.

Summary

$30k was a tradable short-term support level

$20k is firm support for a major correction

$12.5k to $15k is support for a BTC bear market

Lower is possible in a broad bear market accompanied by a financial crisis on par with 2008 and March 2020. Perhaps the $1000 area could be tested in a deflationary panic. It would depend entirely on whether the government devalues the currency and if competing coins displace BTC as "digital gold." It depends on if the Tether bubble pops. See: Did Unbacked Tether Creation Manipulate Bitcoin Prices?

I hold BSV, a Bitcoin fork that makes micropayments possible. It can replace both Ethereum and BTC. Unlike other coins endlessly hyped as speculative trading vehicles, BSV is more preferred by developers building applications. (BSV is not listed on many exchanges because it calls itself Bitcoin and the exchanges claim this would confuse investors.) It is implementing the full vision of what digital currency should be. I'm speculating on its survivorship and emergence as the superior blockchain. I think it will get crushed along with everything if BTC collapses, but will add more on the way down.

Finally, here is BTC inverted. It looks like the mining charts I've been buying the past 2 years. If you think about the volume profile in reverse, there's lots of support down to $30k (up on the inverse chart). After that, it's a straight shot to $20k. There is some support there, but it isn't deep because after that, the well of buyers came in around $15 or lower.

The real way to acquire "diamond hands" is by paying a low price. The volume profile says the real diamond hands won't be tested until around $15k.

Update: Here's BSV. Unfortunately, falling BTC will take out the uptrend and probably send BSV down to around $50.

BSV Cascading Bases

Similar to many gold and commodity producer charts, BSV has a nice base that if completed, points to an even nicer gain. Relative to BTC, it also sports what some miner charts have: the cascading (fractal) bases. The completion of one base begets a larger base, and a larger, etc. Above $370 (assuming BTC is $62,000) a series of breakouts could take the coin to $4000, again assuming BTC holds around the $62,000 area. If BSVUSD clears $400 it similarly completes a base with a target above $750, which going back to BSVBTC triggers another breakout level.

In a commodity producer, this type of move would play out over years. With crypto, time is compressed as phase changes come quickly. BSV is not a speculative coin though. Many exchanges do not allow BSV because they consider it a "scam" coin trying to ride on the Bitcoin name. I hold it because I see BSV as the full expression of Bitcoin's potential. I'm probably more excited about BSV in 2021, than I was about what became BTC in 2010, becase developers are close to showing the full potential of the technology.

Coinbase and other fintech companies associated with BTC are shadows of the current financial system. BTC is marketed and memed as digital gold. A store of value, decentralized, transferrable across time and space. What BSV aims for is the original aim of Bitcoin, to turn even the smallest bits of information into money. It's sort of like imagining a bank as the place to store physical dollars coming out of the gold standard world, versus the potential for new financial products and derivatives. BSV can change the way people organize, search and exchange information. Where people think of BTC like a digital gold bar, BSV is more like air. At this moment it is accumulated by those speculating on the network itself and developers building on it, but if successful, the price will be high not because people want to hold it like a gold bar, but because it would be like air is to the ecosystem. Whether you have more or less of it would depend on your level of activity. This demand will drive the price, rather than price leading demand as in speculative markets. You can see some of its potential on Twetch, which allows for quick posting of information to the blockchain and is developing an NFT marketplace. Canonic is publishing books directly to consumer. The even bigger market potential is in more fundamental "information supply" such as search engines and advertising, along with eliminating spam information by driving out of the marketplace by imposing cost barriers. Beyond that are all sorts of digital interactions you pay for today, such as streaming music and cloud storage, plus all sorts of new markets that can be created by very low transaction costs.

BSV Ruler Chart

15 Minutes to Go

What's happening?

Canonic

Wyoming Moves Bill to Legalize DAOs

Decentralized autonomous organizations can become legal entities if Wyoming turns this bill into law. Defirate: Wyoming DAO Bill Approved by Senate

Bill 38 was originally submitted in January of this year and sent to the Wyoming Senate’s Joint Corporations, Elections & Political Subdivisions Committee in early February.

The bill would enable DAOs would to legally register themselves as limited liability companies (LLCs), connecting the blockchain-centric business structure to the legal world. Such DAOs would then be recognized by local state authorities and more easily engage in contracts and legal agreements that are legitimate and enforceable in the eyes of state law. This could involve off-chain employment, investment and more, at last bridging the gap between blockchain and traditional systems.

According to Professor Wright in his Tweet-storm, Wyoming will also be building a registration API, which would drastically streamline the process for setting up legally-recognized DAOs.

Destroy Online Privacy

Bokhari: Microsoft and Friends Want to Destroy Online Privacy

According to Microsoft’s press release, it has partnered with several other organizations to form the Coalition for Content Provenance and Authenticity (C2PA).

Put simply, the purpose of this organization is to devise a system whereby all content on the internet can be traced back to its author.

The press release states that it will develop these specifications for “common asset types and formats,” meaning videos, documents, audio, and images.

Whether it’s a meme, an audio remix, or a written article, the goal is to ensure that when content reaches the internet, it will come attached with a set of signals allowing its provenance — meaning authorship — can be detected.

I understand why the immediate reaction to this is fear. The government, media outlets and online mobs combine into a terror organization that hunts for regime enemies. One can easily see how USG would use this power to arrest and imprison, or at least terrify and destroy the economic life, of anyone who posts the Truth. However, once a system like this exists, it works both ways. Analysts could trace back nonsense such as systemic racism to its source. We know who publicly advocates for lies, but we don't really see who is behind it. Destruction of anonymitiy reveals everyone. It would be far easier to trace the connections between media and government. They produce a steady stream of lies, for example the FISA warrants were obtained using mainstream media article that were based off the FBI's own fake dossier. It would be immediately obvious the FBI was committing a high crime in sourcing a warrant frmo a story that was planted in teh media by the FBI.

Lies are the enemy of Truth. It's true that the source of Truth doesn't matter. I understand the fear given the current authoritarian zeitgeist, but the reality is if the ruling class was competent, they would immediately arrest anyone devising this system. It will turn into yet another "all-time backfire."

More to the point, all technology has dual use for good and evil. The blockchain itself has already achieved Microsoft's goal. The hot new item online is NFTs, non-fungible tokens that are sometimes attached to physical goods. It shows the chain of ownership going back to the creator. Microsoft wants to build a system that already exists! In future, there will be decentralized and public blockchains you can trust such as Bitcoin and fake-chains run by governments and corporations that try to hide the truth. Choose wisely.

Draper Bets Amazon Will Accept BTC, But Amazon Won't Use Bitcoin

ZH: "Gold Is Dead, Move On" Billionaires Bet On Bitcoin, Draper Sees $5MM Price

Ever the optimist, Draper also considered that Amazon would add a direct Bitcoin payment option in future.

"Amazon will probably start accepting Bitcoin pretty soon," he said, noting that consumers have been able to buy products indirectly using cryptocurrency for many years.

Yes, what I want to do is pay $50 fees to buy a $5 item on Amazon. Amazon will probably never use the BTC blockchain.

Totalitarianism is Coming Back, Greens Want to Measure How Much Sin is in Each Product

Totalitarianism is coming back via blockchain technology because it gives central planners a new lease on life. A major drawback of central planning (and socialism) is the lack of economic information. If everything is on-chain, however, there's far more information for central planners. In their minds, the information problem may be solved. With body sensors on the way, it's possible for the state to monitor the location of all citizens. If the state says to exercise for 30 minutes per day and you do not, it could punish you. If it has total location data, it could regulate daily interactions. A state like Iran could punish anyone who doesn't go to mosque. A feminist or chivalrous society could fine men who do, or do not, hold the door for a woman. It could get into micromanagement of individual behavior and tax or fine people for violating the state's mandate. These are extreme examples, but many companies are already working on implementing green religion into the economy by tracking the carbon emissions of commodities. This video is cued to the relevant discussion: Technology can be used for good or ill. It can help Man create or enslave, depending on the laws, religion and customs under which they are governed.

Game Over for Federal Reserve?

On a day when GameStop is ripping higher on a new short-squeeze, it is fitting that today migth also herald game over for the Federal Reserve.

ZH: Treasury Yields Explode After Catastrophic, Tailing 7Y Auction

Ahead of today's closely watched 7Y treasury auction, where the bulk of the recent Treasury rout has been concentrated as traders hammered the belly of the curve, we said that "If the 7Y tails a lot, watch out below" as that would only add insult to today's furious selloff injury. Well, that's precisely what happened, because with the 7Y pricing at 1.195%, this was a whopping 4.1bps tail to the 1.151% When Issued.

The auction was, in a word, catastrophic.

Starting at the top, the bid to cover tumbled from 2.305 to 2.045, the lowest on record, and far, far below the 2.35 recent average.

But if that was ugly, the internals were even worse, with the Indirects plunging from 64.10% to just 38.06%, the lowest since 2014, as no foreigner suddenly wants to even smell US debt!

The article finishes with:

The Fed better do YCC NOW, or else we are about to find out just how much absolute bullshit MMT really is.

I'm not sure the Fed can do yield curve control. First, YCC targets the short-end, it isn't about buying the whole yield curve. See Bloomberg (archive link): Fed’s Yield-Curve Control Isn’t for Taming Long Bonds

Now, to bring up yield-curve control misunderstands how Fed officials, notably Vice Chair Richard Clarida and Governor Lael Brainard, have said they envision carrying out the policy, which remains deep within the central bank’s toolkit. Simply put, yield-curve control has never been about squashing longer-term yields, like those on 10-year notes or 30-year bonds. Instead, it’s a way to make sure bond traders don’t try to strong-arm the Fed into raising short-term interest rates before it’s ready to do so.

Things could change. The assumption in the article is that long-bonds are fine, but that was a couple weeks ago. Today's 7-year auction caused a breakout in the 10-year yield (above 1.50 percent), that it subsequently lost as stocks plunged on the up move. Before the auction, the 2-year Treasury bond yield spiked 40 percent to a high of 0.194 percent.

It's possible this was a selling-climax in the bond market and a correction in stocks, along with inflation trades such as commodities will begin. If not, I'm not sure if YCC would help the stock or bond market. It might calm the market down for a time, but my sense is many investors would see more intervention as inflationary. That would accelerate a sell-off in long bonds, cause panic buying of gold and commodities, and probably trigger a crash in the stock market because "long duration" tech stocks dominate the market. (DJIA beats SPX which beats COMPQ in this scenario.)

I have barely sold any mining stocks, but I am well hedged with a few tactical puts along with a lot of VIX calls.

A Sign of the Top Hat

Twetch (link to sign up) did something interesting today. The sold a hat tied to a non-fungible token (NFT). NFTs are basically ownership rights fo teh digital world. They create scarcity in an otherwise non-scare environment. There's a lot that can be done with them. However, I'm not going to go into NFTs here. My point today is they sold 100 hats for quite a tidy sum, with the hat numbered #1 sold for $420 worth of BSV. The hats and associated token do have value because they can be redeemed for free Twetches (it costs about 2 cents to post a text only Twetch).

More broadly, we are in the binary moment where the future braches into extermely rapid inflation or we are at the top of a massive bubble. We were here in March 2000 with tech stocks, June 2008 with oil and September 2011 with gold.

The analogy I keep coming back to, because it is the perfect way to think about cryptocurrency, is that Amazon lost more than 90 percent of its value in the early 2000s bear maket despite becoming more successful than even its most delusional bulls could even imagine in the year 2000. Cryptocurrencies are doing amazing things, there are here to stay, and you'll defeintely want to be involved, but I can't shake the feeling that if you set aside some cash to invest, you'll be able to increase your exposure by 10x simply by waiting. Maybe this time is different, or maybe it's history rhyming one more time.

America's Tyrants Want Fox News Removed from Cable

ZH: Taibbi: Why Dems Pushing To Censor Fox News Is "An Insanely Stupid Idea"

The movement crested this week with a letter from California House Democrats Anna Eshoo and Jerry McNerney, written to the CEOs of cable providers like Comcast, AT&T, Verizon, Cox, and Dish. They demanded to know if those providers are “planning to continue carrying Fox News, Newsmax, and OANN… beyond any contract renewal date” and “if so, why?”

Expect Fox News to be kicked off cable. Social media is already being retarded by bans and censorship. I deleted my Facebook account almost a decade ago, I stayed off Twitter for a long-time and then ditched that. Censorship will increase exponentially in the years ahead because the ruling class runs on the Narrative, not Truth.Their rule is built on lies, from Russiagate to systemic racism. Their "solutions" and the biggest problems in America. When reality smashes them in the face, they call the Truth disinformation. They are going to lose control of the currency in the coming years. It's possible they will institgate and lose a major war. Crime is already soaring in cities run by the ruling class. Inflation is guaranteed to rip if we don't get lucky (?) with a depression first.

There is alternative social media on Gab.com . Censorship-resistant Twetch where you pay to upload to the Bitcoin (BSV) blockchain and get paid for your posts, or pay others for their good content. A bigger solution to technological totalitarianism is Urbit. I have some stars and will start issuing planets soon...