An Idiot’s Guide to Bitcoin (Part 2)

Idiots rejoice! [Morning Reckoning] February 07, 2023 [WEBSITE]( | [UNSUBSCRIBE]( An Idiot’s Guide to Bitcoin (Part 2) - Think like a crypto outsider… - The anatomy of a bubble… - Bitcoin’s big comeback? Baltimore, Maryland February 7, 2023 [Greg Guenthner] GREG GUENTHNER Good morning Reader, Idiots, rejoice! Crypto isn’t just for math geeks, tax evaders and anarchists. Even a normie stock trader can figure it out. You might even make a buck or two along the way… If you’re going to survive the post-bubble crypto hellscape, you need to think differently from the social media pumpers and whatever’s left of the HODLer crew, desperately clinging to their worthless alt-coins. Fortunately, there’s hope for us all – and we don’t need any technical expertise to trade our way out of this mess. In fact, I believe these alluring crypto narratives will cause more harm than good to your portfolio. If you want to actually make money playing cryptocurrencies and their respective trends, you have to ditch the pipe dreams and nutty NFT pitches and tune into how buyers and sellers are actually behaving in the marketplace. Last week, I explained how a responsible luddite should approach the crypto-sphere. Today, I’m going to expand on these ideas. I’ll also dive into the charts to determine where we are in the crypto cycle – and where the sector could go from here. [Has World War III Just Begun?]( NATO sends tanks to Ukraine… Russia prepares for a winter offensive… [Is the beginning of World War III?]( [This Simple Chart]( I’ve just released an urgent message with my thoughts. But more importantly, I’m offering to send you an [exact playbook]( on what I see playing out in the world and what you need to do to prepare. [Simply click here now to watch my short message and to see how to claim a copy completely free of charge.]( [LEARN MORE]( And just in case you missed it, [here’s]( where you can find the first part of my crypto guide. Here are the key facts you’ll need to digest before moving forward: First, you need to recalibrate your brain and start to think like a crypto outsider. Ultimately, price matters more than any convoluted crypto narrative. I’m not asking you to plug your ears and ignore everything you hear. Just don’t get sucked into the compelling storylines that might cloud your investing judgment. It’s all too easy to convince yourself to hang onto a bad investment when you’ve bought into the story. Next important point: crypto and tech growth are two sides of the same coin. Cathie Wood was spouting some nonsense last week about how ARKK is the new Nasdaq. Sounds like something the brainwashed crypto masses would have latched onto during the Covid Bubble. Crypto is the new Nasdaq! Crypto will topple Wall Street and usher in a new era of world peace! It’s no surprise crypto and the tech-growth trade captured the attention of the wildest speculators during the bubble times. They traded together on the way up and the way down. Crypto even led the stock market higher during the bear market’s extended relief rally last summer. Therefore, it’s important to link crypto’s trends and prospects with the tech-growth trade until the market proves otherwise. Watch how the beaten-down tech stocks behave and compare these moves to the action in the cryptosphere. Pay special attention to any divergences. I’ll lay out my price analysis in just a moment. But before we get to the charts, I need to explain why the Bitcoin narrative began to fall apart during the wild bubble times, and how the sector can heal in the aftermath of its latest bear market. Anatomy of a Bubble Early adopters and investors in any new idea are going to be the true believers. In this case, we’re talking about the folks who understand the tech and longer-term prospects of crypto. But the market became much more complicated as crypto assets began to rapidly appreciate, creating bubbly conditions. This frothy action attracts a new class of investor: the greedy speculator. Speculators and profit-chasers ultimately don’t care about the longer-term uses and prospects of cryptocurrencies. Sure, they might perform some due diligence and recite talking points about inflation or decentralization. But their primary concern is making fast money off rapidly rising asset prices. Bubbles are bubbles. It doesn’t matter if we’re talking about tulips, dot-coms, or monkey JPEGs. You could have an asset with the noblest intentions in the history of markets. Bitcoin has been sold as an alternative to global fiat currencies, an inflation hedge, and the key to a decentralized future. That’s fine. The jury’s still out! What’s important to understand is that none of this matters once the speculator class takes over. The prospect of infinite riches twists the entire marketplace into a raucous cash grab. Nothing matters except making as much money as possible in the shortest amount of time. Bubble conditions also poison the minds of the true believers and early adopters. They feel vindicated! After all, their predictions came true and the market is rewarding their foresight. The rapid price appreciation eventually turns these “rational” investors into raving speculators. By this point, everyone involved in the bubble is cheerleading the daily action. This is when a top begins to form. When it comes to crypto’s most recent bubble, the bull’s last gasp came in late 2021. In the following year, Bitcoin lost more than 75% of its value. Many other crypto investments fared much worse. [Man Who Predicted Bitcoin Warns: “Don’t Buy Bitcoin!”]( [This Simple Chart]( James Altucher first predicted Bitcoin all the way back in 2013… And ever since, he’s been one of the biggest advocates for it. But now, he’s warning Americans that buying Bitcoin could be a big mistake… [Click here now to see why](. [LEARN MORE]( A Post-Boom Cleanse Bitcoin bottomed out just below $16,000 in November. The flagship crypto has since posted an impressive pop to begin 2023, gaining 40% on the back of a strong January rally. The big question: Was 2022’s drawdown enough to chase out a majority of the bubble-era speculators and “reset” the market? My main concern with this crypto rally is that it’s happened too soon. Yes, we’ve witnessed bankruptcies and scandals throughout the crypto world. The NFT market completely collapsed. The worst of the froth has evaporated. But was it enough? Does crypto need more time to lick its wounds? We could get this answer sooner rather than later. For Bitcoin, $25,000 is the pivot I’m watching: [chart] Bitcoin (and Ethereum, for that matter) is constructively consolidating its January rally. If it can hold a move above $25K, it could very well break free from a nasty bear market and build a new, sustainable uptrend. This move could take time to materialize. In fact, Bitcoin might need more time to churn in a wide range between $20K - $25K before making an honest attempt at a breakout. We won’t know how it will react until we see the price action close to the breakout zone. We also need to watch tech-growth closely – as well as broader market conditions. Will Bitcoin diverge from tech and blaze its own path? Or are these trades going to continue to push and pull each other in the weeks and months ahead? Any change in this relationship will offer valuable trading information to anyone paying close attention. No matter what, we should brace for volatility. Crypto is notorious for late night and weekend rallies and breakdowns. Just don’t jump the gun. We don’t need to make any grandiose predictions to play the next move. Watch for the reaction at $25K and act accordingly. Barring some quick whipsaws, we should gain some valuable insight into crypto’s ultimate direction in the weeks ahead. Best, [Greg Guenthner] Greg Guenthner Contributing Editor, Morning Reckoning feedback@dailyreckoning.com [Urgent Notice From Paradigm CIO Zach Scheidt!]( [This Simple Chart]( Hi, Zach Scheidt here… I’m the Chief Income Officer at Paradigm Press. With inflation raging (and showing no signs of coming to an end any time soon), almost everyone in America is feeling the pain in a big way. Which is why, several months ago, I set out on a big mission… my goal was to create a [complete, step-by-step plan to surviving and beating inflation]( one that anyone could take advantage of. Today, after hundreds of hours of research, I’m revealing all of my findings. [Simply click here now to see how to survive America’s deadly inflation crisis](. [LEARN MORE]( In Case You Missed It… Sean Ring, Contributing Editor Everything They’ve Told You About Russia Is A Lie [Sean Ring] SEAN RING Dear Reader, Buongiorno from beautiful Northern Italy! The great Austrian School economist Murray Rothbard once said: “Everything the government touches turns to crap.” I think we need a corollary to this statement, regarding the media. “Everything the mainstream media feeds you is bull crap.” And for the last year at least, and for much longer on the fringes, there is no story more lied about, falsified and fabricated than the Russia-Ukraine War. The Rude Awakening has covered this since I’ve been its editor. And much of the factual content in this piece is taken from my Rude newsletters. But as we’ve only just become acquainted here at the Morning Reckoning, I’m going to show you why I always thought it was lunacy to start in with the Russians. [Biden’s “Hush-Hush” Plot Uncovered]( [This Simple Chart]( Right now, Joe Biden – along with 9 of the world’s largest banks – have initiated [a disturbing new experiment with YOUR cash](. It’s called “Project Cedar” – and up to now it’s been kept fairly “hush-hush”… But in [this urgent new exposé]( you’ll discover critical details behind Project Cedar and what Biden’s master plan really is. [Click here to learn the critical details before it impacts your money](. [LEARN MORE]( Russia Is Not Iran, Iraq or North Korea It’s not just Americans who misjudge Russia. The United Kingdom – America’s faithful lapdog – is utterly delusional when it comes to the Russians. A few weeks ago, I had a conversation with a great old friend of mine and what struck me when we spoke about the Russia/Ukraine kerfuffle was how he referred to Russia as a “little” country. Little? It’s typical BBChé brainwashing. I’m not just talking about landmass. (Russia is 70x larger than the UK. Times… not percent.) I’m not just talking about population. (Russia: 144.7 million; UK: 67.4 million.) Let’s compare their economies as well… Look at the difference between their GDPs on a PPP (purchasing power parity) basis: [chart] Credit: [Wikipedia]( Notice anything there? Yes, Russia’s economy is bigger than the UK’s. “Russia is just a gas station!” you say? How about “The UK is a giant laundromat!” in return? Russia has stuff. The UK launders money and has castles. And Russia’s stuff really, really matters to the world. [“The Situation Is Getting Worse By The Day”]( That’s what the President of the US Chamber of Commerce just said about the supply chain. If you thought the supply chain issues were over, think again… Things are about to get much, much worse. And everything from your local grocery store to your gas station could be impacted. That’s why I’m urging everyone I can to prepare now… [To see the #1 move to make before this problem gets any worse, click here now.]( [LEARN MORE]( Sanctions and Price Caps Even if you’ve taken a macroeconomics course from the most Keynesian-brainwashed professor, he’d tell you that both sanctions and price caps are stupid and never work. Both [The Wall Street Journal]( and [Politico]( wrote how even Iran, of all countries, escaped the full force of Western sanctions. What’s most galling is we’ve had recent proof that sanctions not only didn’t hurt Russia, but they also helped Russia develop expertise that didn’t have before! But before I prove that to you, let’s look at the stuff Russia has that we need. There’s nothing the US, EU, and UK has that Russia needs. Coca Cola, Harley Davidson and Gucci bags are all nice-to-haves. Don’t get me wrong, Russia’s Instagram “stars” have been crying for months. But there will be other avenues for them. There’s nothing in Europe or North America that Russia absolutely needs. And when I write, “nothing,” I mean nothing. Zip, zilch, nada. Sure, closing markets are never nice, but Russia isn’t going to starve anytime soon. And Russia has all the raw materials it could ever need to continue to build, operate, and grow. There are many things Russia has that the US and EU need. This is where the “English majors,” as [Dmitry Orlov]( calls them, have really miscalculated. The [US and France need Russian uranium]( for their nuclear power plants to operate. Not “want,” but need. Even if the US ramps up domestic production, it doesn’t have the technology right now to enrich uranium. Quite the pickle. Another example: remember how you were taught the US has the best oil in the world, “light, sweet” crude? Well, that’s great for making gasoline. But you can’t make diesel with it. You need heavy oil like Russian Urals to make diesel. What about palladium for catalytic converters? Here’s what the nutcases over at the [World Economic Forum]( had to say: In terms of raw materials, Russia is also the second-largest exporter of cobalt, one of the key elements used in making rechargeable batteries. It is also the world’s second-largest supplier of vanadium, which is used in large-scale energy storage and in steelmaking. The country is the sixth-largest exporter of gold, accounting for 4.4% of the world’s supply, and the 10th biggest supplier of lead. Russia accounts for 10% of the world’s supply of nickel, which is used to make stainless steel and vehicle batteries. The price of nickel soared by 250% in a day on fears that sanctions would hit supplies, and the London Metal Exchange even suspended trading of the metal because of the unprecedented price rises. Russian exports of platinum account for 12.3% of global supply, and the country is the world’s fourth-largest exporter of tungsten. The country also supplies smaller quantities of manganese (which is used in glassmaking, drinks cans and as paint pigment) and zinc (used in making car bodies). Russia covers about 3.5% of global demand for copper, and copper prices have hit record highs this month. After knowing this, would you want to fight these guys, or cut a very large peace/free trade deal? And that’s not all! Watch this video in which [Putin bragged about how sanctions made the Russians use their brains](. If you doubt Putin’s words – I don’t blame you. But on the topic that the 2014 sanctions helped Russia become the world’s number one wheat exporter, have a look at this chart from [Progressive Farmer]( from before the war: [chart] Russia never built helicopter and marine engines before. It does now. And while it doesn’t dominate the world stage, watch this video (with the captions on) to see [Putin brag]( about how the ruble is now more stable because they’re not just an oil and gas country anymore. Sure the ruble bobbed and weaved when the war started… First it hung around $78 in the beginning, popped up to over $110 shortly thereafter, and crashed to almost $50 as we neared July. But since then, it’s slowly been building back up to the $70 it finds itself today… the rollercoaster seems behind us. And let me remind you: The people who look at those numbers and scream “CAPITAL CONTROLS!” are the same people who frantically watched CNBC yesterday wondering what its central bank would do to manipulate interest rates. It’s important to call out that kind of hypocrisy. The bottom line is this: these sanctions aren’t fit for purpose. No sanctions are. Russia Isn’t Losing This War I wrote the previous sections into this piece because I want you to know where I’m coming from. Now we look at the war and forward. This is important: Russia is not – I repeat “not” – losing this war. Sure, Russia was sloppy at first. And Putin really thought he’d be welcomed as a liberator (sound familiar?). But Russia is not only NOTlosing this war but may very well win it soon. Why would I say such a thing? First, because I don’t listen to the numbskulls at ABC, CBS, NBC or BBC. Second, the people I do listen to are either on the ground or ex-military. To wit, [Gonzalo Lira uploaded a great video to YouTube]( yesterday that I watched with mouth agape. To summarize quickly, he says NATO doesn’t have the weapons to fight the full war the neocons are egging on. And he also says the Pentagon and its allies want to negotiate a settlement with Russia. The RAND Corporation just published a document called “ [Avoiding a Long War]( to that effect. But the Russians don’t trust the West at all… so the Russians won’t negotiate. And it gets worse for the West… NATO Is Toothless Russia has mobilized some [650,000 soldiers]( for the next phase of the war. They won’t be that underprepared or sloppy again. But what about NATO? Not even 100,000 soldiers. NATO just doesn’t have the resources. And even if they did, they can’t move them around. The Ukrainian railroad and road systems are gone. Bombed out. And what’s scarier is that for every Russian soldier that’s been killed in battle, Ukraine has lost eight. This won’t end well for the Ukrainians. The Russians simply can’t lose this war because they’re building something much bigger. An Age-Old Existential Battle Between Land and Sea Another good friend of mine always likes to say I’m overexaggerating the threat to the US and the USD. “As long as the US Navy is patrolling the seas, the world isn’t going to change all that much.” Which is technically right… if you believe we still live in a sea-based world. But what the Russians, Chinese, Iranians and Indians (and Turks as well, perhaps) are building is a land-based world. That’s why China’s Belt and Road Initiative is now a must for the “World Island.” Halford Mackinder, a British geographer, summarized his [Heartland Theory]( thus: Who rules East Europe commands the Heartland; who rules the Heartland commands the World-Island; who rules the World-Island commands the world. Mackinder’s map looked like this: [chart] Credit: [Wikipedia]( Why is Eastern Europe, and hence, Ukraine, so important? Because it’s the only flat land route to invade Russia. And that’s what this is ultimately all about. The Heartland itself is mostly Russia. One can argue the warming of the Arctic is the best thing that could happen to Russia. That’s because they’ll have their own sea routes and won’t need even China’s ports. By the way, feast your eyes on the map below: [chart] Credit: [Wikipedia]( That’s China's Belt and Road Initiative and it essentially obviates the need for an open water navy. AKA what American taxpayers have been spending so much money on. Rail is faster and cheaper than water, if – and it’s a big if – they can get the whole thing off the ground. Just look at that map and ask yourself one question: If the Russians have all the resources they need, demand to be paid in rubles for them and can rail them anywhere on this world continent, what on earth do they need US dollars for? Answer: they don’t. And that’s the onion. I can’t overstate how disastrous this will be for the Western standard of living. If the West loses this war, and it most likely will, there would be no more petrodollar on which most Western consumers get a free ride. Wrap Up It’s time to look at the world with facts in hand. We never should’ve started with the Russians. And in all likelihood, they’re going to finish this war with a victory. After a decent interval of watching Europe stew in its own juices, the Russians will open up talks. But not before Europe throws off its status as an American vassal. The world is changing before our eyes. And I think we’ll have to let the chips fall where they may before we make a move. I’ll be back on Thursday to give you more of my take on the state of our financial world. Let me know what you think so far by emailing me [here](mailto:feedback@dailyreckoning.com). Be sure to tell me if there are any topics you’d like me to cover in future articles. All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com Thank you for reading The Daily Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Greg Guenthner] [Greg Guenthner, CMT,]( is chief strategist at Forge Research Group. He has spent the better part of the past two decades developing long-term and short-term strategies with a single goal in mind: to help everyday investors generate outstanding returns and control their financial futures. Greg’s charts, analysis, and insights have appeared in Marketwatch, Forbes, Yahoo Finance, and many other financial publications. [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2023 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your The Daily Reckoning e-mail subscription and associated external offers sent from The Daily Reckoning, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. We welcome comments or suggestions at feedback@dailyreckoning.com. This address is for feedback only. For questions about your account or to speak with customer service, [contact us here]( or call (844)-731-0984. 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