Bitcoin Could See Another 4 Weeks of Fireworks

By Juan Villaverde

Last week, gold casually smashed some record highs.

If you’ve been following this newsletter, you know that gold and Bitcoin (BTC, “A”) are correlated. So, it’s no surprise that despite already rallying for over a month, Bitcoin decided it was time to shift gears again. Early this week, it woke up and shot past — and held above — the important $40,000 level.

Meanwhile, the Nasdaq 100 is flirting with a new all-time high.

For an economy supposedly on the brink of doom, 2023 is closing with a bang for risk assets.

This apparently has most financial experts scratching their heads. But not me.

Why? Because there's really just one golden rule in finance these days: Global liquidity is king.

Here's the deal: When central banks fire up their money printers, asset prices go on a joyride. This impacts everything, but for crypto, it's like strapping a rocket to a roller coaster.

Crypto basically takes any move in global liquidity and cranks it up to eleven.

You see, governments worldwide are so deep in debt they practically have their own central banks on speed dial, just to keep their debt markets from turning into financial black holes.

China, with its modest $50 trillion housing bubble, has been pumping out around $100 billion every month. That’s almost as if they’re trying to match the Federal Reserve’s 2020-2021 party levels.

And the U.S. isn’t much better. In fact, it’s in a spending spree, with the deficit hitting 8% of GDP.

That’s pretty wild for non-recession times.

And who’s footing the bill? Our friends at the Federal Reserve, of course. They’re tasked with ensuring Uncle Sam can keep swiping the credit card with no spending limit.

But as of right now, they’re doing so in secret.

Right now, the Fed is like that magician who distracts you with one hand while doing the real trick with the other. Officially, it’s tightening the belt to fight inflation. But on the down-low, it’s also funneling cash through backdoor channels. Indeed, the Fed has quietly slipped in about $300 billion in liquidity this year.

Fed Chair Jerome Powell is actually sweating bullets over a potential banking crisis … even as he talks about being tough on inflation.

But why the need for secrecy?

Well, the Fed has this little image issue. Inflation’s lingering around 4%, and Powell needs to look like he's got it under control … all while greasing the wheels of the Treasury market with enough cash to keep things rolling, which will increase inflation.

Will the Fed keep the cash flowing in 2024?

Bet on it. It’s an election year, and nothing spells reelection season like opening the monetary floodgates.

With a fiscal deficit like we had in 2023, expect the printing presses to run overtime next year.

And China? Their debt saga isn’t wrapping up anytime soon. Their solution so far is to continue its policy of good old-fashioned money printing.

Bottom line: Governments are buried in debt they can’t hope to pay off. The magic solution? Keep printing money and pumping liquidity into the markets.

That process, which began in 2023, is set to accelerate into 2024 and beyond.

For crypto, this is the rocket fuel the market needs for a moon shot.

We can already see a microcosm of this happening right now. The printing from the People’s Bank of China — the very thing that set off the gold rally — has pushed Bitcoin out of consolidation and into an extended rally despite the fact that, according to the cycles, it’s time for Bitcoin to take a breather.

Once a cycle becomes extended, it’s hard to predict where the natural end could be. That said, I don’t see this push extending past January.

At most, that gives us another four weeks of potential fireworks. 

Once it ends, don’t panic. We’ll still be in a bull market with key macroeconomic forces lined up in early 2024 that could push the broad market higher. A correction ahead of those should be considered a buying opportunity.

And if you’re looking for additional insight into how to navigate the increasingly volatile crypto market, I encourage you to check out my Weiss Crypto Investor newsletter. In it, I share my long-term investment strategy, along with specific “Buy/Sell” recommendations for the top Weiss-rated large-cap crypto projects.

Best,

Juan