I have been in bitcoin for over ten years now. I have seen so many ups and downs. These ups and downs have made a lot of people a lot of money.
Bitcoin is storage value and a hedge against inflation. Nothing will ever happen on the bitcoin network as far as payments or smart contracts like other coins like Ether. With that said, bitcoin is currently correlated to high beta low revenue tech stocks. As we saw stimulus come in from the government along with all of the sugar the Fed has pumped in, the gamma profile of those stocks paid off and those stocks moved exponentially higher and bitcoin joined the ride.
But bitcoin shouldn't track those type of investments. It is supposed to be a hedge against inflation and for storage value. Well we have had inflation and Bitcoin went up. Now Bitcoin is going down....Why? Don't we still have inflation? Yes, but the markets have been adjusting to the Fed and the strong probability of a rate hike in March and several more this year. Not to mention, the chance that the Fed may shrink its balance sheet, post the completion of their taper. In short, the Fed will remove stimulus to fight inflation since we are at full employment. If the Fed is successful, inflation will come back to normalized levels. Therefore, it is bitcoin (pro inflation) against the Fed. Importantly, I have learned throughout my career that you never fight the Fed. They will always win and rightfully so. They do have the printing press pari passu with MMs having infinite shares....
So when does the drop in these risky assets end? Well based on historic measures, they still need to go lower. How much lower? Honestly, I think we are about half way or mabe 3/4 of the way there on Nasdaq high beta stocks. So if bitcoin is correlated, worst case is $17.5k on bitcoin using $35k. But my opinion is that the correlation between high beta tech stocks and bitcoin will start to breakdown with Bitcoin turning neutral to bullish faster than high beta tech stocks. Why?
Storage value. Big tech companies are still investing in Bitcoin and will not stop. They are long term. I am long term. I have owned bitcoin for 10 years. I have had a lot of woulda coulda shoulda. Don't get me wrong, it provided very nicely for my family. Private equity will keep coming in, corporations will continue to buy Bitcoin. Where else can they put their cash? Institutional money coming in solidifies the storage value theory.
Cryptos are here to stay though folks. Miners, no matter what coin, will be needed. Investments into the sector in 2021 were humungous. Yes, they will maybe slow down this year or they actually speed up, who knows. Regardless, TCRI is going no where as a miner and their stock price will not be correlated with the bitcoin market UNTIL THE STOCK REACHES FAIR VALUE. And fair value is a lot higher than at $2. Do the math, fair value is a lot higher than $2 even if Bitcoin drops to $10k....Once we hit the fair value number later this year at higher levels, that is when you will start to see this trade like other miners whose stock prices is dictated by coin values going up or down....
Good luck everyone. I'm buying more on Monday and will continue until we reach $5.
Everything I say is my educated opinion and is NOT investment advice
