Friday, September 22, 2017

BTC in the Bull Trap

It appears BTC prices are headed for the "Bull Trap". This is a technical term used by people who study speculation or hype cycles [see this article].  A bubble phenomenon (in this case BTC valuation) has a well known shape.

If you pull up the BTC to USD valuation, you will see a similar shape appear every few years.

The trigger for speculative bubbles in the BTC market appear to be FBI seizures of BTC from places like Silkroad, or Hansa/Alphabay. These are illegal markets in proscribed materials which hold large quantities of BTC as escrow. The bulk of the high value transactions on these markets are narcotics related. There is at this time a sizable cash flow from the US to China (mainly purchasing Fentanyl) but every major narcotics player uses these markets.

When the FBI "takes down" a well known market place, it does so (IMHO) because the volume of trade there in illegal narcotics becomes sufficiently high that it starts affecting the traditional price control mechanisms that the DEA and USIC put into place. I think its all part of a larger plan, but obviously I was never read in to what that plan is.

Each "take down" is accompanied by seizure of several hundred thousand BTC. The BTC are usually returned to the owners (if they are not involved in illegal activities) or simply auctioned after a few months. In the immediate term however a major take down produces a sharp rise in demand for BTC, and that drives the price up. In this space speculators jump in and drive the hype cycle/bubble.

At the peaks of the hype cycle, the BTC exchanges come under pressure. The demand is so high that counterfeiting grows and the exchanges are supposed to stop that. If they don't they fall like 'Mt Gox' which creates an added level of scarcity and feeds the bubble.

I feel the recent Chinese move against BTC is driven by concerns about the security of the exchanges themselves. I suspect that the DPRK guys have been gaining off the BTC market in ways that the Chinese don't like very much (and the Chinese don't like anything they can't control anyway - really who does?).

As the exchanges shut down, the transactions displace to other places which can still host them, this loss of trade momentum can cause the price to drop. That price drop is where the Bulls get stuck. It is the panic among the Bulls that really fuels the price plunge. As the exchanges shift and new channels emerge, the trade momentum resumes and we head into the "normal". Beyond that lies the much more complex rationalization process.

We must recognize that just as US or Chinese interventions can cause changes in the price of BTC, other states can affect it too.

As things stand unless the RU can get money back out of Wall Street, the RU banking sector will collapse. There is a partial collapse already on the private side, but the contagion of bad debt will spread to the government side too. RU will not want the price of BTC to fall until they have extracted whatever price they want for their BTC.

DPRK also needs to carry out BTC based transactions. This is the fastest way to get what it wants without having to pay in hard cash. Thanks to BTC, there is no need to send ships filled with Burmese Heroin to Iran and then get "SuperBills" back from there and then use the "SuperBills" along the I-90 corridor in the US ... etc etc etc... all that pain and suffering goes away with BTC.  If KJU is going to keep conducting tests, he needs a less than cumbersome payment options for all the stuff he needs to keep going.

With lots of pressure on BTC from RU and DPRK, I think (despite US and CN moves) we are likely to see new exchanges emerge. Either the PRC government will cave to pressure from the Fentanyl sellers or from its Crypto currency miners (which I will bet you are linked to Chinese intelligence operators) or desperate parts of the RU private banking system will create new exchanges that pull the volume off the Chinese exchanges.

This is IMHO far far far far from over.

DPRK is planning a Juche Bird to remove all doubts about its capability. I think the impact of such a statement by KJU is profound and it will amplify pressures to reignite the BTC valuation.

The battle for control of the BTC price is actually the battle for control over the global economy.


At 8:15 AM, Blogger Ralphy said...

This comment has been removed by the author.

At 8:20 AM, Blogger Ralphy said...

the chinese central bank has pledged co-opporation with trump about noko. trump said it was an unexpected development. we'll have to wait and see if they are serious. apparently the chinese banks do not not want to be locked out of the US system.

why japan lost war to the US........

some similarities of japan bushido to noko.

At 8:26 AM, Blogger Ralphy said...

code of bushido

1. willing to die for a cause morphed into eager to die.

2. appearances are everything.

3. un willing to tell their people bad news.

4. people who are unwilling to die for their cause are scum. pow's are thus, scum.

At 8:32 AM, Blogger maverick said...

The Chinese are doing whatever is necessary to publicly dissociate themselves from KJU. The main aim of Chinese policy seems to be to make RU contributions to DPRK appear greater than their own. Given how the Trump-RU investigation is laying certain things bare... the Chinese IMHO correctly estimate that making RU seem like the bigger supporter of KJU will put Trump into an awkward position and he will be unable to adversely affect Chinese interests. Between the "investments" of the Anbang group and Trump Corporation's "brand rights" in China - I suspect the Chinese have Kushner and Trump by the balls, but who knows perhaps there is some wiggle room there that I am unaware of.

The big test will be if the traffic patterns on the Yalu River Bridge and the DPRK port of Haeju have changed significantly. There is a train filled with coal that goes across the bridge once a week or so. If we see that time table change, we can make some claims about a shift in Chinese posture.

Given the extent of Chinese investments in DPRK real estate, I feel it unlikely that China will walk away from DPRK. It is a bit like asking people in NYC/NJ to walk away from investments in WB because they don't like Bibi. It simply can't happen. Bibi has them by the balls. They will dance to his tune no matter what their public posture on Yair's open worship of Nazis might be.

What a twisted world we live in. I never thot I would see the memory of Simon Wiesenthal insulted in Tel Aviv of all places. Frightening - incredibly frightening!

At 6:17 PM, Blogger Ralphy said...

according to michio kaku.......fukushima will take 40 years to clean up. workers cannot stay near the melt down reactor more than a few minutes at a time.....and another earthquake could start another release of radioactivity......the gift that keeps on giving.

At 6:33 AM, Blogger maverick said...

Yes, core areas should be cleaned up by robots preferably.

doubt the earthquake risk. Not sure how Michio reached that conclusion.


Post a Comment

<< Home