Bitcoin: The Bubble and FOMO

I love it  Bitcoin was all the way up to $15,361 when I looked.  And, since I sold my short position in the market, I’ve been more than pleased to watch Bitcoin because it’s a sort of “coincident indicator” of the National Delusion we’re all presently living under.

Seriously?  A year ago Bitcoin was what?  Do I see any hands?  $768.  But everyone’s getting into the game now: Bitcoin to start futures trading, stoking Wild West worries.

That pencils out to just about exactly twenty-times its price of a year ago.  If you think this isn’t a Bubble, may we propose rehab?

(Continues below)

 

Not too many people have clarity when it comes to understanding cryptos.

True, it’s an alternative means of exchange, but so are gold and silver.  What makes cryptos  useful is they are hard to hack. Experts say, however, that when the first quantum computers hit the market (inside five years) the time-to-hack will drop to around a minute.

But we don’t have to wait: Digital currency exchange NiceHash says bitcoin worth nearly $64 million hacked.

The next thing to worry about is that legislation is likely.  One proposal would designate Bitcoin a “bank” and that would result in government reporting and THAT would blow one of the main functions of Bitcoins – secrecy in banking.  Start circumventing government intent and how you’ve got a criminal discussion.

And it gets better.

You see, Bitcoin is a limited production commodity accessible only through mining, at least from the outset.

That’s unlike the host of other cryptos that have come along.  Most of these don’t go through anything like mining.  There’s just a huge amount of coins set aside for the founders.

Follow this closely:  because there is no mining, and the only way to get some of these is by paying cash, that essentially turns the underlying “thing” into an unregistered security.  And that’s clearly illegal, even under present law.

About here, you may be wondering “With all these land mines and trip wires – and with all those sealed indictments around the country that no one knows that that’s all about…could THAT be what’s coming?

Hell, I dunno.  Could be that, maybe a massive arrest plan for South American gangs, human traffickers, kiddie-porn rings, or…who knows?

BUT one thing I was really clear on – when George Noory was so kind as to interview me on the new non-fiction book I have that’s just out (ebook and paperback, see Dimensions Next Door: Hacking Space-time) is that the market has a major Q1 problem to address in January or February.

We’re quickly running out of “good news.”

What’s in that timeframe?\

Well, the Fed’s got to crap or get off the pot on an interest rate hike. Mueller’s going to have to “put something on the board” to justify all the fishing expedition headlines.  Plus?   We’re moving dependents out of Korea, so that looks to blow in February or maybe early March.  Toss in oil prices and the glut will begin to disappear…and earnings will begin to drop in quality….why there are all kinds of good news items for now that could FLIP.

Which get’s me back to Bitcoin.

I don’t care if there go to a trillion…they seem to me to be about the best indicator of euphoria there is.  The price of BTC screams “The Bubble is Still On!” in notionals.

People I know, like my deflationist pal Jas Jain, pragmatically point at the failure of the 10-year bond to move and issue stern warnings to all who will listen.

Go over here to Yahoo Finance and look at the maximum time scale on the 10-year (^TNX) and you’ll see his case:  We have been in a 36-year, long wave bond yield decline and we’re now in what I’ve described previously as the unavoidable mechanics of financial collapse.

Here’s how it works.  (refer to the cocktail napkin below):

As the bond yield goes down, bond prices go up.  In the summer of 1981, they were over 15.5%.

What also happens (at that extreme) is that stock prices collapse – hence the major recession in 1980-1983.

Now the other way around:  When yields on bonds fall toward zero, the price of stocks can go infinitely high.  Which (if you haven’t noticed) is where we are now and where I guess we could be for another year – or longer.

This is all orchestrated by the Federal Reserve which has no idea how to get out of the “box canyon” they’re ridden into, to put it in cowboy terms.

They SAY they want to raise rates.  But the market obviously isn’t buying it.  It’s going the opposite way.  They know the Fed is BS’ing ’em.

THAT is because while the Fed talks a good game, the reality is that they have increased the money supply by more than seven percent annually.

BUT – and this is the box canyon part – they can’t just have a “come to Jesus” moment of brutal spiritual honesty and say “We have allowed the currency to become so debt-logged that it only has 4-cents of purchasing power on the dollar left.

The reason they can’t walk Obama’s old “transparency” myth is that under Modern Monetary Theory (MMT), as long as they are making up more money than is needed, the economy will keep giving the illusion that it’s working.

I’m just reading  Asset Pricing under Asymmetric Information: Bubbles, Crashes, Technical Analysis, and Herding (Markus Brunnermeir’s fine discussion) and the very first point he makes is that some market players will always have more, different, or less information related to price discovery than others.

What he doesn’t get into – but which would be a FINE PhD discourse for someone in today’s world – is How MMT effectively dampens the price-discovery oscillations.

In other words, when there’s an upward bias to the money supply, you have to start by “tilting your graphs just so” to reflect that you’re not playing in a casino with a level floor.

That, in turn, is where we refer back to the four classic information injection results described by Youssefmir, Huberman, and Hogg in  “Bubbles and Market Crashes” available online here.

Flip over to their quad chart on Page 17, and you’ll see what I’m talking about.

What’s hard to integrate into viewing present-day markets is that the Fed’s application of MMT (print festival) probably has two axial effects.

First, the casino floor tilts due to the abundance of “money” coming into the system.  Which isn’t a huge thing, but a factor for sure.

But the OTHER effect is it causes what in electronics would be effective “ringing” of a tuned-circuit.  In this view – there would be a compression of the steepness of the curves because “money” being so easy (the Fed makes it so) that the angle of bubble ascent becomes more and more acute.

It’s obvious when you think about it:  If there is no “new money” coming into a system, then in a simulation like the YHH paper linked above, you get semi-predictable results.

If money is going up at an honest rate, roughly corresponding to the growth of GDP, then bubble formation is less likely.  But what if unlimited money arrived today?.

Suddenly – if each of us has unlimited money, the formerly bounded price discovery gets taken out back at executed.  There is NO UPPER LIMIT with infinite money supply.

And that’s what all these models are about:  YHH look at the “pure state” and then Bunnermeir looks at bubble dynamics, and Ure’s sitting here pondering what the math relationship is between excess money injections and magnitude & duration of the bubble.

I think in non-mathematical terms.  But you don’t need much math if you can visualize selectivity in electronics.  

A research note for Jas:  See the discussion of how the Q-Multiplier in the O.G. Villard, Jr. paten is described on this page.

If you don’s have a PhD in DSP like Jas does, the notion is that as you “pull in the sides of a passband” that additional energy is translated to a “higher Q or peak due to sharp resonance” in an L/C (inductance and capacitance) circuit.

About now, I could delve into a HUGE discussion of the similarities between analog circuits and economics…gain, selectivity, Q, resonances, and the like.  But, since I’m not teaching a class on interdisciplinary studies, we’ll just pass for now…

Still, the point about MMT and excess liquidity isn’t all bad: CoreLogic Reports Homeowner Equity Increased by Almost $871 Billion in Q3 2017/

So it’s back to the morning’s news flow…

Job Cut Report

Toss me the press release…

CHICAGO, December 7, 2017 – U.S.-based employers announced 35,038 job cuts in November, up 30 percent from the same month last year, when 26,936 job cuts were announced. Employers have announced 17 percent more cuts than in October 2017, when 29,831 cuts were announced, according to a report released Thursday by global outplacement consultancy Challenger, Gray & Christmas, Inc.
So far this year, 386,347 job cuts have been announced, 22 percent fewer than the 493,288 cuts announced through November 2016. This is the highest monthly total since April, when 36,602 cuts were announced. November caps the lowest year-to-date total since 376,057 cuts were announced through November 1997.

“While job-cut announcements have remained low all year, major M&A activity, such as the CVS/Aetna deal and the possibility of Amazon buying generic pharmaceutical manufacturers, could lead to a spate of large-scale job-cut announcements to open 2018, especially at Pharmaceutical, Retail, and Health Care companies,” said John Challenger, Chief Executive Officer of Challenger, Gray & Christmas, Inc. “

Hmmm…remember that the crank in the woods out in East Texas told you:  Market’s going to run out of good news.

Then there’s General Electric to cut 12,000 jobs in power business revamp.  That’s show up in coming months…

Oh wait….NASDAQ futures still up 41 – someone must still be crazy…you think?

Congress’s (next) Trump Gambit?

Donald Trump Jr. Declines to Answer Questions About a Russia-Related Conversation With His Father.

Middle East Stupidity

This will be bad’: Clashes break out in West Bank over Trump Jerusalem speech.

HWood Stupidity

Harvey Weinstein lied about sleeping with Gwyneth Paltrow to attract other women, report says.

Hot times in HWood continue as Southern California wildfires force mass evacuations in Los Angeles.

Uh…this is rareMan rescues rabbit from the flames

Corporate Tax Scam?

When I grow up, can I be a multinational, please?

ExxonMobil, Chevron, Shell paid no tax in Australia for 2016.

Or, a lawyer? AT&T/Time Warner antitrust hearing to focus on trial date.

Consider the Source

What baby talk sounds like around the world reports CNN…

(Oh boy, we’re on a roll this morning…)

Our Kind of Headline

Why demand for British wool is unravelling.

And Here We Go Again

Fashion models expose sexual harassment.


Comments

Bitcoin: The Bubble and FOMO — 24 Comments

  1. Check out the automatic earth site where a Dr d has set out imho an epic exposition of the bitcoin phenomena. Quite a thrilling read

  2. Is Bitcoin the Mark of the Beast?

    Bitcoincharts Dot Com is showing Bitcoin trading around $15,000 with the high for the night being a rather Beastly $16,667.

    da bear

  3. “Not too many people have clarity when it comes to understanding cryptos.”

    When ‘push comes to shove’ what will be more valuable (trade able!) the Krueger Rand, or Maple Leaf in your pocket, or your story that your ‘crypto’ is momentarily inaccessible to make payment for your desperate needs?

  4. Ure Missing!
    OK, Ure only missing on Coast. I went to replay Tuesday night and, doggone it, you just won’t play. I’ve emailed the Premiere folks, so it may be fixed by the time you read this.
    73

  5. As the investigation of Trump jr nibbles at the heels of Mr Bigly and the fires rage in L.A. the decision is made to move the US Embassy to Jerusalem and Rage ignites Palestine. What a coincidence. What is next?

  6. The bitcoin situation is one of getting a lot of people to invest/buy a little bit of money in something of limited availability.

    And with the current attitude of getting something for nothing (by moving assets) as being admirable we have what you see.

  7. Is Warren Buffet considering Bitcoin as an investment or store of value? RIOT has been a little volatile. I still don’t understand Bitcoin, but, then again, I am Ure age.

    • Mr. Buffet is a really down to earth guy savvy on the financial world.
      My guess is he sees this as a false gain and won’t waste his time on it. The way he talks sounds like my fathers advice. If you like a companies product like the direction they are heading then invest. Bitcoin in my way of thinking doesn’t fit any of that.

    • They make tulips look like a wise investment; at least tulips are lovely to look at . . . the crash will be spectacular!

  8. Won’t be any war in N.K.for a number of reasons the biggest are China and Russia and Kim knows it,he has nuclear weapons and the means to deliver them,like it or not he’s part of the nuclear club and knows what happened in Libya when they gave up their nuclear weapons.No its table time now time for some honest talks and time to stick to whatever agreement that comes out of those talks something we have never been very good at..

  9. Just following history..
    Claims on how the Economy is is just that claims.. very few live in the real world. take unemployment compensation for an example. On average the only ones I have known that got it either worked for a seasonal company that used that as the winter buffer so to speak or those leaving a company that is either folding or publicly downsizing. Usually those that quietly get downsized or let go.. how it usually works is a company can’t go on record of letting to many people go. so during the yearly witch hunt they will let a few go that are willing to work anytime and all the time.( the higher paid that aren’t at the top of the retirement ten to twenty year employee’s) the thirty plus usually are allowed to stay. for the younger kids they cut hours.. you have bills to pay they want you gone and they cut hours. I was the manager of one department in a company that would even withhold pay if the cutting hours didn’t work. use to get notices from the manager to make sure my employees didn’t think this was a campground just a rest stop on their way to another job. the reason in my opinion is pay. the state had a pay program where they would compensate a percentage of wages for up to sixteen weeks for those employees under a certain income level and tax exemptions on any new building. anyway the way I have seen it they make it so that the employee leaves he can’t get unemployment.. if they are let go then they can’t get unemployment either unless the company allows it. so the numbers of unemployed can vary up to what eighty percent.. in a four block radius here when we went wage less for a year there was six.. one day at a local establishment the store manager was telling me that he was getting flack from his higher ups because the store was down thirty grand for the year.. I said yes so.. it only makes sense we would spend six hundred a month there if there are five that all spent the same amount then you should even be down more.
    It used to take a generation or longer to forget the painful lessons of a bubble. The victims had to age and die off before a future generation could repeat the mistakes anew ( kids never listen). But now, we have the same generation repeating the same mistakes three times in less than 20 years. Go figure. My grand daughter was in yesterday and made a comment that she didn’t know why her parents were getting part time jobs. I told her honey you just don’t understand.. six cars fifty dollars a month, cable two hundred dollars a month, rent a thousand dollars a month, babysitter nineteen hundred a month, electricity 100 plus a month, water etc.. not counting food. sure you can live on credit cards for a while but eventually they max out.
    in my way of thinking this is like a tsunami we are seeing the waters pull back.. how big the wave gets that crashes depends on how far back the water gathers to make the wave.
    As prices rise people in the real world eventually begin to question whether or not their money has any value.. for a while most of us try to keep the luxuries that we have then the oh well we have to survive. so you cut out the weekly trip to go shopping, then the date night out, eventually you begin cutting services.. why pay seventy dollars a month for a cell phone when you can get a cheaper phone without a service contract ten dollars a month.. when it gets to tight the home phone goes why have a hard wired then cable etc. I know if I cut the unnecessary services I could easily put two grand back into the budget to live with.
    then you have the central banks that can just print up as much as they want when they want usually a number on a server. They hand it out for free in unlimited quantities to the banks. Who have their own mechanism kind of a fractional reserve banking for creating even more money out of thin air. crypto is even easier. “money”, and then maybe add “stocks and bonds”. But those aren’t actually wealth.
    All financial assets are just claims on real wealth, not actually wealth itself. A pile of money has use and utility because you can buy stuff with it. But real wealth is the “stuff”
    Take Isaac Newton.. and the south sea company. It was granted a monopoly in exchange for taking on Englands war debts.
    Newton invested early on made a butt load of wampum .. got out.. but the thrill that here is the lottery I can get even richer.. and put his money back in to gain even more wealth which he did then it broke and Newtons apple fell he left spiritually broke and penniless..
    What I see is the classic repeat of history.Those that had lived through hell have all pretty much left or are now sitting by some window speaking rarely waiting for someone to care enough to visit them with fear that they will soil themselves.
    Treading these waters takes someone getting in quick and knowing when to get out fast. George has it down to a science and has the intuition and experience to know the signs that is great I wish I had known you when I was a younger man and had some wampum to invest I would follow you completely unfortunately I have lived in the real work a day world of common wages where this isn’t a possibility to even try there are just enough funds to live from one paycheck to the next. when I was young it didn’t make any difference what I knew I didn’t have a peice of paper on the wall ( which I preach constantly to my kids and grand kids and luckily each of them have gotten full scholarships so far. I see one that should she is the quickest and the brightest doing math at high school level ( that was last year) but she is eight and her parents are penniless so she will more than likely be a book worm and work low end jobs and I am way to old to even consider having enough time to wade through the waters of long term investments.

    • ‘Books’ (whether paper or digital) and the knowledge within, are worth more than silver, gold or any digital currency – civilizations to follow will know us by what we valued.

    • The no income, or low income can get Free education as it is based on the parents salaries, even if they are divorced. So your granddaughter should get a full free ride if all things stay the same and she keeps her grades up. The other thing I have come to realize, is the non-federal reserve GIVES money to it’s cronies for free, picks a person to come up out of nowhere, and all of a sudden they are buying Facebook, etc. All money given under the table to takeover or target any company or industry they want. There is no competition at the top, only collusion. The little people compete over the scraps. That’s why there will never be an audit of the Fed. They pay the corruption monies for all the economic hits to countries and cultures, especially these last 100 years. The hidden hand greasing the baseless.

      • Oh fed up.. Lol unfortunately that free education is an illusion most hear and believe.
        It’s like something my sister told me about her city. She told me about this lady. Food stamps housing welfare checks etc. That she was getting this huge amount of cash free and she got a loan for a hundred thousand dollar house and free tuition. I laughed and asked her. Do you know this woman. Nope she’s someone that a friend of hers heard about. That woman doesn’t exist. There’s no free ride. The year we existed without an income. A prime example. No income the yearly witch hunt dropped everyone in upper laborer tier. No unemployment.. We owned a car ten years or newer and had our own home. These things are capital you can sell your car and house and live off of the proceeds. The income level to qualify is standard deduction divided by twelve at that time it was 750.00 if you make below that then you get some assistance if above that your making living wage. Some area’s have allowances due to the increased cost of living. Grants for the poor I think amount to a couple of thousand or less. To qualify for these they take into account what the household income is and use that as a factor .. There isn’t a free lunch ..now maybe your area has banks that freely loan money without collateral and toss money out the Windows but around here they don’t and my thoughts are its the heard about a guy that knew a guy that has a cousin type story. The only ones I have known personally that did get a free ride was refugees.
        That’s also why there’s an over abundance of college students seeking sugar daddy’s and spending personal time in trade for help with tuition.
        I never could afford to get the sheet of paper on the wall. Yet I’m a voracious reader..
        Usually my wife doesn’t allow me to share my opinions lol lol but there isn’t a free ride. Like the old saying goes still holds true today. Cash,ass,or gas no one rides the bus for free. Also if you are able to get assistance housing for an example if you receive food stamps then the other is adjusted since both are considered income. There are some that have taken advantage of the system by lying but seriously they are very few. Like less than one percent.

      • Hopefully my eight year old grand daughter won’t be dumbed down. Unfortunately statistics says she will. My thought is if an eight year old is trying to determine how to calculate the thrust potential of sunlight..I actually put my hearing aids in when I’m around her.
        I was shocked one grandson wasn’t on the A honor roll so I voiced my concerns to him about it. He isn’t the reader he was when little and hasn’t ever studied through school the subject he was low in will require him to read and learn study habits.

      • So let me tell you a true story which happened 4 years ago. A kid graduated valedictorian. Her Dad quit work one year before she graduated. He showed zero income. His daughter got a FREE ride to Texas A&M because the Father was broke where it counted, which was in his checking account and W-2. So, YES, there is a free ride if you know how to game the system. Yes, there is a free ride if you are an illegal, yes, there is a free ride if you are a refugee, and yes, there is a free ride if you are the child of a migrant worker, even if your parents only dragged you around in the summer time. There are also FREE rides for other minorities. So, if you are not one of those select FREE ride groups, you will just have to dig a little deeper to figure out how to get those grandchildren, who seem highly intelligent, a FREE ride. My friends daughter was 2nd in her class behind the valedictorian. Her parents worked, and have worked full-time since they were in their teens. Of course, they had to pay 100% of their child’s college tuition and expenses to Texas A&M (they wanted to, I just meant there was no scholarship or free money offered or available because of the parents W-2’s and checking account). The valedictorian bragged to everyone about her FREE ride.

      • so they should move to Texas.. good thought.. here that doesn’t count.. of course there are scolarships if she had a good enough point spread. unfortunately that isn’t the norm otherwise we wouldn’t have the problems with high cost of an education.Most of the people I know pay three to six hundred a month in loan fees. I personally never made enough money to qualify for the give away programs or a free college educations. today you can get an education just not the paper..almost all of the colleges everywhere have courses you can take without credit on just about any subject you would like to take. I have taken many to learn something you just don’t get the paper unless you pay the price..even with a scolarship which isn’t really a free ride.. I know what going a year without an income is like.. it sucks..some get the loans forgiven but then they have to do community service in the profession for what they went to school for in trade.. just like i traded a year of my life working off a debt by working three full time jobs and a part time job. I am not sure if the following story is real or not since I have read it both ways..

        https://www.usatoday.com/story/news/politics/2013/06/18/congress-federal-employee-student-loans/2434323/
        http://hechingerreport.org/taxpayer-funded-aid-program-benefits-richer-students/

        I will never forget my employer.. in the early eighties I worked for a company that had tuition relief.. I was set.. I went to the local college and signed up.. then took in the paperwork the company wanted to be authorized.. the person in the position of granting this assistance looked at me and said… How is this going to benefit your job?
        well the long drawn our reply was after graduation I would be an asset in a position in the office.. .. then the person said no.. how will the college education benefit your position in the company now?
        I ran a banding machine.. LOL LOL LOL LOL LOL it wouldn’t since all you did is position and push a button.. the tuition assistance wasn’t for the people on the line where an education wasn’t needed.
        Once in a while you will see someone that gets a free ride but they are very far and very few and not everyone gets a scholarship or grant for school no matter how poor they are otherwise the streets would be full of college graduates. I have seen a few refugee’s get free college and other things.. there is always a price to pay

  10. George

    Great article; as always, its like trying to get a drink from a fire hydrant. LOL. Although, when the likes of JPMC and their ilk get involved in Bitcoin, you know it has to be something they want to control, and take advantage of. This may be the very reason there is longevity in the crypto currencies.

  11. Winter Olympics coming up in February in South Korea… wonder how that will factor in to all the crazy going on over there with the whole Feb/March timeline…

    • Jamie – excellent and insightful observation. Those of us who are ‘seasoned’ enough can recall the 1972 Munich Massacre, in which 13 souls (11 Israeli Olympians, one German police officer) were murdered in cold blood by the Palestinian Black September terrorist group. The ‘world stage’ provided by the Olympics makes them a juicy target for political extremists and other assorted whacko nutjobs. BTW – the IOC did not officially honor those eleven butchered Israelis until 2016 during the Brazilian summer games, 44 years after the fact.

    • Bitcoin is experiencing a vertical parabolic rise.

      But hey “it’s different this time.”

      By the way all governments have to do is declare possession of Bitcoin or crypto currency a crime.

  12. “the beat goes on, but I’m so wrong..I’m a dancing fooooool” F. Zappa
    A little clue, Bitcoin is a/THE store of value..ie Digital Gold, except can’t be Re-hypothecated.
    The CORE developers have moved development to Store of Value, not transactional.Core released Lighting Specs yesterday – hugely bullish for Bitcoin in about a year, after Segwit is fully implemented.
    The Quantum computer hack time of Blockchain hashing is pure B.S. FAKE NEWS again, shame on you G, Quantums don’t work like that.More FUD on unregistered securities regarding ICO/tokens. Sure,some bad actors in the space, like Enron, Lehmans ect. Companies use ICO as fund raising to start their NEW businesses. Thereby bypassing Banks, Middlemen and Venture Capitalists – faster,smarter,way cheaper- UN-registered security please, its called Due Diligence. I am looking at 4 more days of upside action in Bitcoin..BUY The Breakout! and survive the future or not.

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