Is Bitcoin poised to rise over 1000%!
The 1976 UK Sterling Crisis was a balance of payments or currency crisis in the UK in 1976 which caused James Callaghan’s Labour government to borrow $3.9 billion ($18.6 billion in 2021) from the International Monetary Fund (IMF), with the intention of maintaining the value of the pound. The fiscal incompetence by governments across the globe has caused the current inflation crises and the dominoes have fallen.
How can the ordinary people protect themselves from the meltdown of global economies?
Fact! Inflation is currently out of control. This is why interest rates are rising and may continue to rise, since this is the only tool in the box to stem the tide of raging price increases. This means that not only is the value of our currency falling in purchasing power by around 9% a year, but our repayments on debt, mortgages, credit cards and bank loans are rising to compound the problem.
All currencies (Pound/Euro/US dollar etc) are classified as ‘Fiat’ currency which has no ‘fixed’ supply (such as many crypto assets). They are printed by centralized governments and backed by governments. Some of us will remember the £1 note from days of old which stated clearly on the note ‘I promise to pay the bearer on demand the sum of…..’ ‘Fiat’ money is backed entirely by the full faith and trust in the government that issued it. However there is no guarantee that the government can remain solvent and will continue to have the ability to pay. This is called a ‘debt default’. Once this happens, more and more of that currency will be needed to purchase an ever-growing limited supply of those goods and services. This is inflation.
We just saw Sri Lanka go bankrupt thanks to oversupply of money through unlimited printing and inevitable inflation. The same fate led to countries like… Ukraine, Venezuela, Ecuador, Russia, Lebanon, Argentina, Barbados, Zimbabwe, Cameroon and Nigeria. Paraguay and Kenya also defaulting on their debt. Once this happens, new payment schedules and more borrowing has to be negotiated with the international monetary fund (IMF). They then effectively take all fiscal responsibility from the country and lay down strict guidelines on how the country will be run fiscally. This leads to poverty and lack of growth and investment often further compounding the problem.
Nearly all countries at one time have gone bust. Historically the UK went bust eight times, as has France. Canada is the only country in the world so far not to have defaulted on their debt.
The system in place is rather like having a credit card and continuing to spend without limitation and paying back only the smallest amount each month. The debt will increase so much that we need to apply for a new card with a new company in order to settle the existing debt and the cycle continues with the new card. Eventually of course this approach will fail.
‘Fiat’ currency, although backed by government, is only as good as the fiscal responsibility the government has not to overspend and not inflating the money supply with unlimited printing of their currency, whilst also collecting enough tax to run the government. This is how governments operate around the globe and eventually they will all fail until a better system is in place.
We must remember that the government’s ability to honour the currency being offered as payment for goods and services, is only as good as their ability to continue to print money. The continual printing of money leads to inflation. This is because the supply is not fixed (like Bitcoin) and the price of the goods and services bought rises over time. This means more and more money is needed over time to buy the same goods and services which were cheaper the day before, the year before and the decade before.
Inflation is the reason a house bought over several decades can go up multiple times in value. We all remember buying our first home for a few thousand pounds and then years later selling the same house for a far higher price than the purchase price. The gains in the value of the home are offset by the purchase of another home which would likely to have inflated in price in a similar way to the house we are selling. What Bitcoin seeks to achieve is to eliminate the inflationary component of the flawed ‘Fiat’ currency system which over the past 100 years lost 99.9% of its value.
To keep pace with inflation, we need to ‘inflate’ the purchasing power of our ‘Fiat’ money somehow. Inflation is taxation through the back door. Governments have always adopted the approach of trying to limit inflation by a maximum of 2% annually. Currently global inflation rates are around 9% (officially, but most people will be experiencing more) and climbing. This 2% target has rarely been achieved for long and is unsustainable. Bitcoin has emerged over the past decade as a challenge to the inflationary nature of ‘Fiat’ currencies.
As highlighted above, Bitcoin is a volatile asset which rises and falls over time. This is similar to stock markets. However, in the same way that, over time stock markets rise in price to counter the effects of inflation. So does Bitcoin, but unlike stock markets, Bitcoins gains have historically, over its 11 year history, been far greater, even taking into consideration its current low point thanks to the global meltdown of assets prices. All this is while we see commodities like oil, gas, coffee, wheat and soya all climb to new highs, exacerbating the problem of inflation.
Since its inception, Bitcoin has risen close to 1,000,000% during its lifetime and is the fastest and most productive asset class in history. This is because of its fixed limited supply of just 21million coins and its availability, where every four years the supply is cut by half! This does not stop it from dropping in value. From November 2021 to June 14th 2022, the value of Bitcoin dropped by 65%. Meanwhile the US stock markets have dropped by over 30%. This means the correlation of the Bitcoin price versus stocks has narrowed in volatility. During the crash in March 2020 after the Covid lockdown, the US market dipped 32% while Bitcoin dropped almost 60%. After the Covid dip, Bitcoin recovered to new all time high rising 1340% in just under 1 year, while the US market rose just 110% over the same period. Bitcoin rose more than 10 times that of the stock market.
The chart below shows clearly that when market sentiment is low these are the best times to buy and then hold until the prices rise over time.
The RSI indicator (relative strength index) has only ever been as low as we are now 3 times in Bitcoins’ history and each time buying at these points returned significant gains.
In January 2015 the gain to the top was over 8000%
In December 2018 the gain to the top was 1822%
In March 2020 the gain to the top was over 1300%
In June 2022 the gain to the top could be ?????????
Costa Cálida Chronicle readers can still get my free EBook on investing in Crypto by emailing me at email@example.com
*Please note I am an independent financial researcher who has zero qualifications, therefore do your own research and understand that prices are volatile so can and will move up and down over time.
This chart shows the price of Bitcoin since 2013 relative to the RSI (Relative Strength Index) below. We see historically that as of June 14th 2022 this is the lowest ever point of the RSI has been on a weekly basis (green dotted arrow below) indicating an exceptional opportunity to buy versus risk to the downside.