We are about to witness the biggest bull run in history

09-28

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Any opinions expressed here are the personal opinions of the author and should not be relied upon for investment decisions or considered as a recommendation or suggestion to engage in investment transactions.

What a week it has been. If you didn’t fly to Singapore last week for Token2049, I prayed for you. Over 20,000 faithful worshippers came out to praise God in whatever way they saw fit. I’ve been to almost every Formula 1 race in Singapore since the nightly races began, but I’ve never seen the city so alive.

Token2049’s audience has doubled year over year. I’ve heard of some unknown projects paying over $650,000 to speak on a smaller stage.

The party was packed. Marquee is a club that can accommodate thousands of people. Look at the line that lasted more than three hours just to attend this event. Seven days a week, a different crypto project or company rents out the venue every night. The price of renting out Marquee is $200,000, not including alcohol.

There are activities for everyone. Iggy Azalea brought in a group of strippers from Los Angeles to create an "experience." Who would have thought that strippers would know how to survive in a volatile market?

Even this Su Zhu (aka Crypto Randall) couldn't resist the urge to make some rain. Randall, why do you look so uncomfortable in the video? Losing money is your specialty. When you eventually deliver your assets to the BVI Bankruptcy Court and settle the litigation, I'll be happy to host you in the Magic City and show you how to do it.

I'm thinking of asking Branson Cognac and Le Chemin du Roi to sponsor my next party... in the words of 50 Cent:

Every hotel was packed, as was every decent restaurant, and when the dust settles in 2024, I suspect we’ll find that the crypto crowd brought more business to airlines, hotels, restaurants, conference venues, and nightclubs than any other event in Singapore’s history.

Thankfully, Singapore tries to remain as geopolitically neutral as possible. This means that, as long as you believe in Satoshi, you can largely rejoice with your brothers and sisters in the Lord.

The energy and enthusiasm of the crypto crowd contrasted with the dullness and boredom of the attendees at the traditional finance conference. The Milken Institute also hosted a conference that same week. If you walked around the Four Seasons Hotel (where the conference was held), you would notice that every man and woman looked the same in bland business casual or formal attire. The dress and demeanor of traditional finance is so calm and unchanging by design. They want people to think “nothing to see here” while they steal human dignity through the inflation their institutions inflict on the world. Volatility is their enemy because when things start to change, the common people can peer into the mirror and witness the true depravity of its masters.

Today, we are going to discuss the volatility of cryptocurrencies and their neglect by the traditional financial sector. I want to discuss how the elites are creating calm economic fundamentals by printing money. I want to discuss how Bitcoin is a release valve for fiat currencies in an attempt to suppress volatility to unnatural levels. But first, I want to drive home a point that short-term macroeconomic forecasts don’t matter by reviewing my performance from November 2023 to date.

review

Many readers and keyboard warriors often accuse me of making incorrect predictions. How accurate were my main predictions over the past year?

November 2023:

I wrote an article titled Bad Gurl. In this article, I predict that US Treasury Secretary Bad Gurl Yellen will issue more T-bills to drain the US Federal Reserve's (Fed) Reverse Repo Program (RRP) funding. The decline in RRP will inject liquidity into the system and cause risk assets to rise. I believe the market will weaken when the Bank Term Funding Program (BTFP) expires in March 2024.

From November 2023 to March 2024, RRP (white) falls 59%, Bitcoin (gold) rises 77%, the S&P 500 (green) rises 21%, and gold (magenta) rises 5%. Each data set has an index of 100.

+1 in the win column.

After reading the contents of the US Treasury Quarterly Refund Announcement (QRA), I increased my exposure to cryptocurrencies. In hindsight, it turned out to be a wise decision.

March 2024:

In my article "Yellen or Talkin'", I speculated that the BTFP would not be renewed due to obvious inflationary concerns. I do not believe that allowing banks access to the discount window will be enough to avoid another non-TBTF crisis in the US banking industry.

The expiration of BTFP did not have any substantial impact on the market.

+1 in the loss column.

I lost money on my small position in Bitcoin put options.

April 2024:

In my article Heatwave, I predicted that US tax season would cause crypto prices to fall as USD liquidity would be removed from the system. Specifically, I stated that I would not add any additional crypto exposure between April 15th and May 1st.

From April 15 to May 1, RRP (white) rose 33%, Bitcoin (gold) fell 9%, the S&P 500 (green) fell 1%, and gold (magenta) fell 3%. Each data set has an index of 100.

+1 in the win column.

May 2024:

As I head to the northern hemisphere for my summer vacation, I publish Mayday based on several macroeconomic factors. I have the following predictions:

1. Did Bitcoin bottom out around $58,600 earlier this week? Yes

2. What is your price prediction? A rebound above $60,000 and then fluctuate between $60,000 and $70,000 until August.

As USD/JPY carry trades unwound, Bitcoin fell to a low of around $54,000 on August 5. I was wrong by 8%.

+1 in the loss column.

Bitcoin has fluctuated between approximately $54,000 and $71,000 during this period.

+1 in the loss column.

I did add a little bit of Altcoin exposure during the summer weakness. Some of the coins I bought are trading below the price I purchased them at, and some are trading above the price I purchased them at.

June and July 2024:

When Japan's fifth-largest bank admitted its huge losses on foreign bonds, I wrote an article about the importance of the dollar-yen exchange rate, titled "Shikata Ga Nai". I predicted that the Bank of Japan would not raise interest rates because it would endanger the banking system. This proved to be a naive assumption. On July 31, the Bank of Japan raised interest rates by 0.15% and triggered a vicious carry trade in the dollar-yen. I continued to explore the mechanism of the carry trade in the dollar-yen under the title "Spirited Away".

While the USD/JPY exchange rate proved to be the most important macroeconomic variable, I guessed wrong on the BoJ call. The policy response was not what I had predicted. The BoJ assured the market that it would not raise interest rates or adjust its money printing policy if it would lead to increased market volatility.

+1 in the loss column.

August 2024:

Two major events happened this month: the U.S. Treasury Department released its quantitative easing policy for the third quarter of 2024, and Powell delivered the "Powell Employment Report" in Jackson Hole.

I predicted that Yellen's return to net issuance of short-term Treasury bills would provide dollar liquidity to the market. But after Powell's "Powell Employment Report" confirmed the September rate cut, these two forces turned against each other. At first, I thought that net issuance of T-bills would increase liquidity because it would reduce the RRP to zero, but then the T-bill yield fell below the RRP, and I predicted that the RPP would rise and consume liquidity.

I didn't expect Powell to cut rates before the election, risking an outbreak of inflation when voters go to the polls.

+1 in the loss column.

RRP balances increased directly after the Jackson Hole meeting and are back on an upward trajectory. Therefore, I still believe that as T-bill yields continue to fall and the market expects more rate cuts at the Fed's November meeting, this will be a slight drag on liquidity.

No result; it is too early to judge whether I am right or wrong.

September 2024:

When I left the Patagonia Mountains, I wrote an article called "Boom Times ... Delayed" and gave speeches at Korea Blockchain Week and Token2049 in Singapore, predicting that the market would react negatively if the Fed cut rates. Specifically, I argued that a narrowing USD/JPY interest rate differential would lead to further yen strength and reignite the unwinding of carry trades. This would cause global markets, including cryptocurrencies, to fall, and would ultimately require an increase in money supply to save the market.

The Fed cut rates and the Bank of Japan kept rates unchanged; this narrowed the interest rate differential; however, the yen fell against the dollar and risk markets performed well.

+1 in the loss column.

result:

2 correct predictions

6 wrong predictions

So the batting average is .250. That's pretty bad for the average person, but as the great Hank Aaron said, "My motto has always been to keep swinging. Whether I'm in a slump, or I'm having a bad day, or I'm in trouble off the field, the only thing to do is keep swinging." Aaron had a career batting average of .305 and is considered one of the best baseball players of all time.

Source: MLB.com

Strikeouts aside, I was still making money.

Why?

Big Assumptions

The exercise I do when writing these macro articles is to try to predict the specific events that will cause a policy response from our corrupt masters. We know that they cannot handle any volatility in financial markets due to the over-leveraging of the entire post-1971 Bretton Woods trading and financial system. We, and I mean the puppets of the trading finance industry and the believers of Satoshi Nakamoto, all agree that when things go bad, the Brrrr button should be pushed. That is always the policy response.

If I can predict the triggers a priori, my ego will be boosted, and maybe I’ll earn a few extra percentage points for predicting them early, but as long as my portfolio benefits from fiat currencies printed to dampen the natural fluctuations of human civilization, then it doesn’t matter if I’m wrong on every event-driven prediction, as long as the policy response is as expected.

I’ll show you two charts to help you understand the massive fiat money needed to suppress volatility at historically low levels.

Volatility

Starting in the late 19th century, the elites who run global governments made a deal with the common people. If the common people surrendered more and more freedoms, then the "smart" government managers would create a calm world by suppressing entropy, chaos, and volatility. As the decades progressed, the role of government in the lives of every citizen grew, and as our understanding of the universe deepened, the world became increasingly complex, so it became extremely expensive to maintain a growing semblance of order.

Before, a handful of people wrote books that were the definitive source on how the universe worked. They killed or ostracized anyone who did science. But when we freed ourselves from the shackles of organized religion and thought critically about the universe we inhabit, we realized that we knew nothing and that things were much more complicated than you thought, as you would discover if you only read the Bible, the Torah, or the Quran. So we can understand why people follow politicians (mostly men, a few women), who replace priests, rabbis, and imams (always men, never women) and offer a regulated way of life that promises security and explains how the universe works. But whenever volatility increases, the response is to print money, to cover up the problems that plague the world with paper, so as not to admit that no one knows what the future will actually bring.

Just like putting an inflated ball under water, the more you push down, the more energy is required to maintain its position. The distortions are so severe globally, especially for US hegemony, that the amount of money printing required to maintain the status quo is growing exponentially every year. That is why I can confidently say that more money will be printed between now and the final system reset than has been printed since 1971. It's just math and physics.

The first chart I'm going to show you is the MOVE Index (white), which measures the volatility of the U.S. bond market relative to the federal funds cap rate (green). As you know, I believe volume is more important than price, but it's clear to use price here.

Some of you remember the rise and collapse of the tech bubble in 2000. As you can see, the Fed pricked the bubble by raising interest rates until it burst. Volatility in the bond market rose sharply in 2000 and rose again in 2001 after the September 11 attacks. As soon as volatility rose, the Fed cut interest rates. Volatility fell, the Fed thought it could normalize interest rates, and then boom, they blew up the subprime housing market and triggered the 2008 Global Financial Crisis (GFC). Interest rates were quickly cut to zero and stayed there for nearly seven years to suppress volatility. It was time to normalize interest rates again, and then COVID happened, causing the bond market to collapse and volatility to soar. The Fed cut interest rates to zero in response. Starting in 2021, inflation fueled by COVID-19 put the bond market in a state of distress and volatility increased. The Fed raised interest rates to suppress inflation, but had to stop raising interest rates before the non-TBTF banking crisis broke out in March 2023. Finally, the current Fed easing cycle occurred at a time of increased volatility in the bond market. If 2008 to 2020 is considered “normal” times, then current bond market volatility is close to twice the upper limit of our comfort level.

Let's look at the dollar amount again. The red line is an approximation of total bank credit. It consists of excess bank reserves and other deposits and liabilities (ODL) held by the Fed and is a good proxy for commercial bank loan growth. Remember, from Econ 101, it is the banking system that creates money by extending credit. Excess reserves increase as the Fed engages in quantitative easing, and ODL increases as banks extend more loans.

As you can see, 2008 was a watershed year. The financial crisis was so massive and credit money was gushing out that it overshadowed what happened when the tech bubble burst in 2000. It’s no surprise that our master Satoshi Nakamoto created Bitcoin in 2009. Total bank credit has never been fully extracted since then. This fiat credit cannot be eliminated or the system will be overwhelmed and collapse. Moreover, in every crisis, banks must create more credit to dampen volatility.

I can provide a similar chart showing the relationship between exchange rate fluctuations of USD/CNY, USD/JPY, EUR/JPY, etc. and the levels of government debt, central bank balance sheets, and bank credit growth. They are not as clear as the chart I just showed. US hegemony cares about fluctuations in the bond market because it is the asset that backs the global reserve currency, the dollar. All other allies, vassals, and enemies care about fluctuations in their currencies against the dollar because it affects their ability to trade with the world.

Response

All this fiat money has to go somewhere. Bitcoin and crypto are the release valve. To keep volatility under control, fiat money will flow into crypto. Assuming the technical soundness of the Bitcoin blockchain, Bitcoin will always benefit as the elites continue to try to break the laws of physics. Everything has a balance, and nothing can be created out of nothing. Every action has a response. In the modern digital world, Bitcoin happens to be the best technological means to balance the profligacy of the ruling elite.

As an investor, trader, and speculator, your goal is to acquire Bitcoin at the lowest cost possible. This may mean calculating your hourly wage in Bitcoin, using excess cheap energy for Bitcoin mining, borrowing fiat currency at low interest rates and buying Bitcoin (call Michael Saylor), or using some of your fiat currency savings to buy Bitcoin. The fluctuations between Bitcoin and fiat currency are your assets, do not buy Bitcoin through leverage because Bitcoin needs to be held for the long term.

Are there any risks?

Profiting from short-term price fluctuations is hard. As you can see from my record, I was correct two out of six times I made a prediction. If I long and short every time I made a prediction, Maelstrom would have been bankrupt by now. Randall and Kyle Davies are right that the elite suppress volatility in cycles. Instead of waiting patiently, they borrowed fiat currency to buy more Bitcoin, and as the cost of fiat currency changed (it always does), they got stuck and lost everything. Well, not everything - I saw pictures of Randall throwing a lavish party at his mansion in Singapore. Don't worry though - the party was held in the names of his children to avoid seizure in bankruptcy court.

Assuming you haven’t abused fiat leverage, the real risk is that volatility will surge to its natural level when the elites can no longer suppress it. At that point, the system resets. Will it be a revolution like the Bolshevik Russians, where bourgeois asset holders are wiped out, or will it be a more common revolution, where one corrupt elite group is replaced by another and the suffering of the masses continues under a new “ism”? In any case, everything will decline, Bitcoin will just decline less relative to the ultimate asset - energy. Even if your overall wealth has decreased, you have still outperformed other assets. Sorry, nothing in the universe is risk-free. Security is just a fantasy peddled on election day by scammers eager to get your vote.

Trading strategies

USA

From the Fed's historical response to "rising" volatility, we know that once they start cutting rates, they usually don't stop until rates are close to 0%. Furthermore, we know that bank credit growth must accelerate in tandem with rate cuts. I don't care how "strong" the economy is, how low unemployment is, or how high inflation is, the Fed will continue to cut rates and the banking system will issue more dollars. From now until the foreseeable future, no matter who wins the US presidential election, the government will also continue to borrow as much as it can to win the support of the people.

European Union

The EU's unelected bureaucrats are committing economic suicide by rejecting cheap and abundant Russian energy and dismantling its energy production capacity in the name of climate change, global warming, ESG or other nonsense. The ECB will cut Euro interest rates to combat the downturn. Governments will start forcing banks to lend more to local companies so they can create jobs and rebuild crumbling infrastructure.

China

As the Fed cuts rates and US banks issue more credit, the dollar will weaken. This allows the Chinese government to increase credit growth while keeping the dollar-yuan exchange rate stable. China's main concern about bank credit growing too fast is the depreciation pressure on the yuan against the dollar. If the Fed prints money, the People's Bank of China can also print money. This week, the People's Bank of China announced a series of rate cuts for China's monetary system. This is just the beginning, the real "big guns" will come when China issues more credit to banks.

Japan

If other major economies are easing monetary policy, the Bank of Japan has less pressure to raise rates quickly. Bank of Japan Governor Kazuo Ueda has stressed that he will normalize interest rates. But given that everyone else has come down to his low rates, he doesn't have to catch up so quickly.

The moral of the story is that once again, the global elite are suppressing volatility in their own countries or economies by lowering the price of money and increasing the quantity of money. If you are fully invested in crypto, sit back, relax, and watch the fiat value of your portfolio soar. If you have excess fiat, invest in crypto. As far as Maelstrom is concerned, we will push projects that have delayed launching tokens due to poor market conditions as quickly as possible. We want to see these green crosses in our Christmas stockings. The brothers in the fund want the big 2024 bonus, so help them out!

Sector:

Halving Tokens

Source

Disclaimer: The content above is only the author's opinion which does not represent any position of Followin, and is not intended as, and shall not be understood or construed as, investment advice from Followin.

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