CHARTIST on BITCOIN
Say It Ain’t So, Bitcoin As EWFF notes last month, one of the last things to happen in a mania is that investors, in hopes of earning outsized returns, become so sure the rise will continue that they borrow money to purchase the assets that are the object of their affection or they purchase assets that are levered up. In the stock market this conviction is now evident in the activity in leveraged ETFs. From late 2017 to mid-January, the ratio of assets in leveraged-long ETFs versus those in leveraged-short ETFs jumped from 2 times to nearly 4 times. This record is more than 34% higher than the prior extreme, set in early 2015. Bitcoin is another speculative juggernaut that demonstrates this principle.
As it registered its price peak on December 17 at $19,892, LendEDU, a consumer credit information website, completed a survey showing that 18% of buyers were funding their bitcoin purchases with credit card debt. Of those, 22% didTo say that bitcoin is not cooperating with these expectations is another understatement.
It is now down 54% from its December 17 top. Another very strong clue is how undaunted the body of bitcoin believers remains. In a recent article in the Daily Express (London), a bitcoin devotee calls the price decline into the middle of January “exciting.” The article is headlined, “Crytpocurrency will BOUNCE BACK.” Another widely followed “bitcoin bull” has repeatedly maintained that “the
$9,000 level marks a major Low.” His year-end 2018 price target is $25,000. Even retirement planners are jumping on the bandwagon. The bitcoin IRA also arrived in January, and its sponsors are super bullish.
According to the headline on the website bitcoinira.com, bitcoins price “Can Increase to $400,000.” An accompanying note cites the “billionaire” behind the forecast and adds, “major investors are predicting prices ranging from $28,000 in 12 Months to over $1 million by 2020.” In a Forbes magazine article, the bitcoin IRA founder says, “It’s time to look at saving for retirement as an exciting experience rather than a painstaking one.”
It may turn out to be “exciting, but for many operators it is recently become downright dangerous, as the post-peak scandal phase that EWFF discussed last month continues to use a wider and wider net. Among the latest discoveries is newly lost crypto coins valued at about $400 million at Coincheck, one of Japan’s biggest digital exchanges. As of last Saturday, the company was not sure how it lost the coins but it “has suspended most trading and withdrawals.”
The company is not alone. Bloomberg published this revealing expose on January 18: “Hackers Have Walked Off with About 14% of Big Digital Currencies.” The theft tally for all those initial coin offerings (ICOs) that EWFF discussed in September, October and December is not far behind. According to the consulting firm EY, more than 10% of ICO funds, worth roughly $400 million, have been stolen by hackers.
The farther bitcoin falls, the bigger the scandals will become. On Tuesday, the SEC froze the assets of a Texas-based initial coin offering that claimed to have raised more than $600 million. The SEC says, “AriseBank used celebrities to tout its fraudulent offering.” It was just three weeks ago that AriseBank announced the endorsement of former heavyweight boxing champ, Evander Holyfield. Among other things, it seems the firm’s president failed to mention in AriseBank’s offering statement that he served five years for felony robbery. Last month we maintained that for some, the journey from blockchain to chains and cell block will be a quick one.” Things are heading in that direction even faster than we thought.