The Market Demand for Bitcoin, Gold and Treasury Bonds is Expected to “Take Off” in 2020

By Itichi Satoshi on The Capital

The first days of the exciting and energetic new decade are a time when we need to take a closer look at events and reflect on the impact of powerful forces that have caused major volatility in global financial markets.

This is not just a trade war or a gun battle anyone can “see the headset.” Nor is it an election or some shocking political conflict.

The biggest detrimental force is the “unprecedented” printing of money worldwide, contributing to market interest rates of zero and even below zero (negative interest rates). This is considered a disease that causes gradual death, and often people will not notice its harm until it all has collapsed.

Back in September 2008 …

When the Lehman Brothers failed and the global financial system gradually approached the possibility of complete collapse …

Most people believe that printing money in an innocent manner is only temporary. They think that it is simply a very normal natural reaction to a crisis and it will end as quickly as it started. Even experts on money printing at the Fed think so.

But at the time, the father of Bitcoin had doubts about this:

The printing of money is not only a “powerful painkiller” for the economy in a “hurt” situation, but it turns out that it is “more addictive” than opioids.

With borrowing costs so cheap, governments and corporations have become “eager” to borrow, and new debt has reached trillions of dollars.

And today, those debts are too large, interest rates rise too fast can increase crisis pressure of interest expense. It can even push important industries of the global economy to the brink of bankruptcy.

The end result is that the global financial system has not grown stronger even though the 2008 debt crisis has receded into memory. But the current global financial system is becoming increasingly unstable.

Meanwhile, smart investors around the world are increasingly aware that another debt crisis is imminent, the problem is just when? Therefore, although the economy and stock market are growing strongly in the United States, there is a big trend that is quietly peeking around the world, which is a growing demand for safe-haven properties.

Last time, safe-haven assets were mainly gold and US treasury bonds. This time, there was a new member joining the safety shelter club:

The experience of 2008 proved very clear, it is really dangerous to allow a small group of central banks to control and manipulate things that have a fundamental value to society like currency.

That’s what Bitcoin is designed to disrupt. Bitcoin was created as a form of money beyond the control of central banks.

For the first time since the introduction of modern governments, a currency has emerged that the new supply is not subject to politic constraints but instead comes from the immutable laws of math.

On Bitcoin’s Blockchain, the currency is characterized by scarcity with tight supply controlled by a network of decentralized participants. Everything is in accordance with the law so that no single individual can change the amount of money earned, let alone who will receive them. The Bitcoin blockchain effectively creates a transparent and fair monetary system.

Everyone knows the rules of the system. No special benefits nor exceptions exist in this system.

Bitcoin is the “ultimate” safe haven of financial markets

Bitcoin’s design brought four important attributes:

First attribute: Bitcoin is extremely flexible. It can travel anywhere on the planet at a nominal cost and has tremendous speed.

Second attribute: Bitcoin is anonymous, difficult to confiscate or steal, as long as the user holds a secure private key in his hand.

Third attribute: Bitcoin easily securely stores at a reasonable cost.

The fourth attribute: Unlike most types of assets in the modern market, Bitcoin has no risks in terms of intermediaries or third parties.

Remember: Almost every other financial asset, there is always an opportunity for a partner or even an intermediary to transact between you and them taking advantage of it.

This is true for bank accounts, corporate bonds, international government bonds, stocks, insurance contracts. On the contrary, it is the mitigation of counterparty risk that makes safe-haven assets become true to their inherent nature.

What is wrong with judging gold as a safe haven asset?

Certainly, gold has intrinsic value far from the reach of governments, so it cannot be modified at all. But gold still comes with the risk of being seized by government officials or stolen.

What about US Treasury bonds?

Admittedly, the US government is the most powerful and reliable “debtor” on the planet.

And it’s also true that the US government can print all the dollars it needs to pay off what it owes. (As long as the dollar continues to be the world’s main reserve currency).

But because US treasury bonds are denominated in US dollars, there is still the risk that the dollars may depreciate naturally or by mechanism. I will write another article to talk about the inflation mechanism of traditional currencies.

Bitcoin avoids both risks

The value of Bitcoin does not depend on the wishes or policies of any government on the planet.

Bitcoin also does not depend on any intermediary market to be abused.

Result:

Despite the fact that Bitcoin was only born 10 years ago, is a new factor in the currency world. But designed with a solid structure and limited supply, financial markets are beginning to see Bitcoin as the “ultimate” safe haven.

The following is evidence for these statements.

Bitcoin in the new decade has begun to be grouped with traditional safe-haven assets such as treasury and gold bonds …

An important turning point when US Treasury bonds began to be similar to BTC prices

The pattern shown in the above treasury bond price chart has 4 similarities with the Bitcoin price:

The first similarity:

• Treasury bonds fell to an important bottom in November 2018.
• Bitcoin also created a low in December 2018, since peaking in 2017.

Second similarity:

• Treasury bonds went flat, with no increase until the end of March 2019.
• Bitcoin also waited until the end of March 2019 before it actually exploded.

Third similarity:

• Treasury bonds increased sharply in August 2019.
• Bitcoin has also increased and peaked in July 2019.

The fourth similarity:

• Treasury bonds spent most of the second half of the year consolidating and accumulating.
• Bitcoin did it the same way.

At the beginning of 2020, the cyclical model shows that both treasury bonds and Bitcoin have experienced important bottoms, followed by a new price increase with the driving force behind that being the strong demand for Safe haven property.

Correlate graph of gold and Bitcoin prices

Gold remains the perfect safe-haven asset that has existed for centuries. And in the modern era, gold is also the №1 asset that central banks will buy when they want to diversify their reserves.

Accordingly, it is not surprising that gold is the leading safe haven asset setting an important bottom of the cycle in mid-August-September 2018.

After that, it was also the peak of gold in 2019 that lasted nearly the whole year: Gold recovered and peaked in September 2019.

More recently, gold has come close to confirming another important bottom in the cycle on November 25, 2019.

Is that a warning bell?

Almost the same.

Because last November 25 was exactly the same day that Bitcoin had set prices quite similar to its recent cycle bottom. This similarity is not perfect but there is certainly a correlation here.

And do you still remember the recent statement of CIC?

Now we will put three safe haven assets together …

• The red horizontal line (at the bottom) represents the bottom of gold (yellow up arrow), treasury bonds (green up arrow) and Bitcoin (red up arrow). All three took place in the fourth quarter of 2018 respectively.
• The green horizontal line (at the top) represents the subsequent peak of Bitcoin (the red down arrow), the treasury bonds (the green down arrow) and the gold (the yellow down arrow).

Gold hits the first bottom and creates the last peak. So gold is the asset with the slowest rise time.

Bitcoin bottomed out and reached the first peak. So Bitcoin has the fastest rise time

Treasury bonds hit the second bottom (after gold) and reached the second peak (after Bitcoin). So the appreciation time of this asset is slower than Bitcoin but faster than gold.

What should you keep in mind?

For the first time in modern history, the third type of safe haven asset is approaching maturity: Bitcoin. For the first time in modern history, Bitcoin is taking the turning point to sync with gold and treasury bonds. And most importantly, these graphs are confirming what we said in the first place:

As we enter the new decade, the needs of shelter properties Full is increasing.

A lot of capital still has not been “poured” into the market by the obsession of “ghosts” in 2008

Everyone’s efforts are not enough to heal all the consequences of the 2008 economic crisis. The fear and pressure of that crisis have not been eliminated.

Recently, for example, the overnight lending rate in the US repo market (where banks and lending institutions) suddenly soared to 10%. That is the first recognition signal that not all things are under the control of global finance.

When liquidity suddenly becomes so depleted, what happens? The perception of counterparty risk will increase, causing the intermediary markets to drop sharply or even stop operating.

No one wants to be the last one left on the train.

Right now, in many parts of the world, we see silent stress over time and create a growing threat to the foundations of the 21st century financial system.

As a result, we expect safe haven markets to attract global capital flows. The cyclical model above confirms this result.

As mentioned above, gold, treasury bonds, and Bitcoin all have created important bottoms in the cycle. From there, these assets could increase sharply in 2020.

2020 will witness a lot of fluctuations, not only from global finance but also on environmental, military, political and diplomatic issues of countries around the world such as Brexit “divorce”. US-China strained relations or recent news about Qassem Soleimani, a powerful Iranian general, was attacked and killed by the US at Baghdad airport early in the morning of January 3, 2020, causing the price of gold, crude oil, and BTC to rise. strong.

Now the economy is not only a single field, but it has become a cohesive glue, a catalyst for relationships across the globe, and the events of the world also influence to the economies of the nations themselves. So, predicting the big picture in 2020 is extremely difficult, and we still have to be prepared and waiting for everything to come.