Friday is the most important day of the financial market week, by far; as it sets the weekend mood, and the tone for the all-important open Monday morning - when, by far, the most capital is deployed.
This is why, amidst this historic pandemic, it has been so telling that three of the four Friday trading days involved have ended badly – the only exception being two weeks ago, when a blatant PPT-led charge in the final hour bought a short respite…before prices plunged this week to a new 3½ year low, featuring a late Friday price collapse - a bad omen for the coming week.
Unfortunately, the Coronavirus news is not only worsening, but at an exponential rate. Clearly, it will be with us for some time, and it wouldn’t surprise me if ALL of 2020 is spent in quarantine, voluntarily or otherwise.
Which is why, at this point, it’s a fait accompli that TRILLIONS, if not TENS OF TRILLIONS of dollars of debt, from overleveraged individuals, corporations, non-profit organizations, financial institutions and governments, will default.
In other word, what I have vehemently predicted since the 2008 crisis – when history’s largest, most destructive fiat Ponzi permanently PERMANENTLY BROKE – is coming to pass…with the sixth sigma exogenous event, COVID-19, serving as the pin to pop history’s largest financial bubble.
In the first four weeks of the crisis, Central banks have printed AT LEAST as much “money” as the entire 2008 crisis - piling massive amounts of rapidly devaluing fiat atop already sky-high piles of debt, all for naught. To wit, historically overvalued stock and corporate bond markets, which had reached such nosebleed levels SOLELY due to the aforementioned 2008 policy response are returning to the mean, with a LONG WAY to go to get there. Meanwhile, commodities are collapsing – in crude oil’s case, creating conditions ripe for military confrontation; with essentially all foreign currencies hitting all-time lows, as the world desperately seeks the “safety” of U.S. dollars.
Nothing governments and Central banks have attempted have slowed this horrific cycle - which is why the upcoming 36 hours may ultimately represent a turning point in global financial history; and potentially, the commencement of the new monetary paradigm Bitcoin was borne to lead - created BY the 2008 crisis, FOR the far worse 2020 episode.
As the news worsened last week, and financial markets continued to plunge, governments started planning draconian fiscal stimulus plans, to supplement the miserably failing monetary measures implemented by increasingly futile Central banks.
In the U.S., for instance, estimates have increased from the initial $700 billion stimulus plan with each down market day – to the point that yesterday, it was leaked that, likely tonight or tomorrow morning, a $2.0 TRILLION plan would be unveiled - to be financed entirely by Treasury issuance purchased by the Fed…that would increase the national debt, currently at $23.6 trillion, by nearly 10% overnight.
Doubtless, the world’s other “leading” governments are doing the same – perhaps in direct communication, though I doubt it as they are too busy dealing with their own COVID-19 problems.
So, when Asian financial markets open tonight at roughly 6 PM EST, just as U.S. stock, bond, commodity, currency, and gold futures open, it will likely start a 22-hour cycle (ending with Monday’s NYSE close) when it will be determined if there is ANY hope governments can stem the tide of the historic capital losses that left unabated, will likely dramatically accelerate in the coming days and weeks.
This is speculation, of course, as no one KNOWS what markets will do. However, given the acceleration of COVID-19’s spread; the resulting, rapidly expanding implosion of global trade; and increasingly draconian government responses; it’s as sure a bet as you’ll find in the financial arena, IMO.
On my Friday appearance on Adam Meister’s “This Week in Bitcoin,” one of the panelists suggested that everything would likely collapse in the coming weeks, under such conditions. This is the most likely scenario, IMO, though there is always the chance SOMETHING doesn’t follow the historic financial playbook. The reason being, that never has an asset like Bitcoin existed, at such a critical time in financial history.
In my view, if financial markets do not stabilize following the unveiling of such draconian monetary and fiscal measures - that unquestionably, will be released by tomorrow morning the latest - there is an at least 50% chance global financial markets will be indefinitely suspended; certainly stock markets, and perhaps bonds, too.
I don’t think currencies and commodities will be suspended, too - as even if they are, price discovery will occur in the real world…and be rapidly communicated through the media. However, it is very possible ALL stock and bond markets are closed – which not only would end price discovery, but freeze tens of trillions of dollars of capital. To that end, banks and brokerages could be closed, too – though more likely, they will remain open with draconian capital controls…like, for instance, steep withdrawal limits.
In other words, a worst-case scenario for global finance - mirroring what at the moment, is evolving toward a worse-case scenario for Coronavirus.
In Bitcoin’s case, there is far less certainty of what will happen – starting with the fact that most, if not all crypto exchanges would likely remain open. Most are not regulated by governments – and frankly, most governments don’t care what cryptocurrency prices do, especially if they expect them to fall.
Last night, I listened to Tone Vays and Jimmy Song discuss the “playbook” of what might happen if governments started limiting bank withdrawals – perhaps, specifically to crypto exchanges to prevent capital from flowing into Bitcoin.
They are 100% correct in their assertions, though such a scenario would likely only occur if Bitcoin prices ROSE in response to market closures. If they fall, of course, governments would feel less need to intervene in a market they deem, like gold, an enemy of their efforts.
However, the beauty of Bitcoin – which again, was created BY the 2008 crisis FOR the new monetary paradigm the 2020 crisis is likely to spawn – is that while it can be slowed, it cannot be stopped.
Unquestionably, MANY crypto exchanges will remain open even if the U.S. and/or EU launch draconian measures to slow Bitcoin trade – and of course, the OTC market would explode.
To that end, aside from the one week after 9/11, consider that major stock markets have NEVER been temporarily closed; and if they are this time; perhaps, for MANY months; it is likely Bitcoin trade would not just increase, but thrive. To that end, it may well be, for a MATERIAL amount of time, the ONLY market where significant value can be transmitted on a 24/7 basis. This is not to say which way its price will go – only, that it’s very possible Bitcoin trade increases, whilst all other markets dry up.
The other important point to consider, when fearing the consensus “all markets will collapse” scenario, is that Bitcoin, given its low market cap, has magnitudes less capital to extract than other markets. Moreover, last week’s plunge to $3,700 was unquestionably, provably so, entirely due to the unwinding of leverage at BitMex – which in my view, would serve the Bitcoin community greatly if it were shut down.
Furthermore, on-chain analysis demonstrates that essentially ALL the BTC sold in the panic plunge was purchased in the last year. In other words, the HODLers that hold the vast majority of Bitcoin’s float didn’t budge – and got MUCH stronger, given that it was they, and NEW HODLers, that purchased the panic-sold BTC.
In other words, there’s just not much “available-for-sale” BTC at current levels – though of course, in the short-term, for countless reasons, the price could significantly decline irrespective. That said, for the reasons discussed above, do not be surprised if yet again, Bitcoin confounds the “consensus” by rising, instead of plunging; and if it does, fear not...as if there’s one financial asset that is decidedly NOT going away, it’s BTC.
Either way, prepare yourself as best you can, both financially and mentally, for what could be an historic 22 hours of financial market trading, starting at roughly 6 PM EST tonight. We are all in this together, particularly the Bitcoin community. I wish you all safety, and the best of luck.