Bitcoin’s price “Stickiness”, or Why it Won’t Exceed $13k for a while

I see so many articles about bitcoin, many of the ones that I have seen lately have all been saying more extreme versions of the same thing, that any day now, bitcoin is going to blast off from where it is to record highs. For many of the estimates that I have seen, numbers like $17k in 2012 would be the bottom of the barrel. I’ve seen estimates saying that bitcoin is going to blast off to over $400,000 between the halvening and increased adoption. However, despite people making these predictions since at least October of 2019, it has yet to come to pass. It seems that every time the price gets just over $10,000, something happens that causes the value to drop, in particular, large sell-offs.

I predict though, that it will be a while before bitcoin actually can start such a meteoric rise. However, there is a major price hurdle in the way first $13,000, which is about where the price was before it dropped last year, and is still recovering from. As the price of bitcoin was increasing during that time, there was a bit of a purchasing fervor. I strongly suspect however, that there are many who have since the price dropped, have held onto the coins that they purchased at that time, and are waiting for the price to get back up to where they purchased it before cashing out. Therefore, it would be reasonable to expect to keep seeing large sell-offs at around that price for a few months, until the pressure of increased adoption catches up to the freed up coins from the large injections.

My suggestion is to hold onto your coins for now, and when the next correction comes, buy while it’s discounted!

 

 

Some thoughts on the Coronavirus and China’s Economy

Well, it seems that the coronavirus is going to have more impact than what a lot of people initially suspected. Many people started by comparing the outbreak to that of SARS in the early 2000’s. There were a few differences in what set the two apart that are really important though. First, there is the rate of infections from COVID-19, which is significantly higher than that of SARS. Secondly, the rate of deaths from the new virus is significantly lower. Third, the incubation period and the infectious period  for this virus seem to overlap. Together, this makes for a virus that transmits quickly, is transmittable even if a person is not yet showing symptoms, and is capable of being spread easily. Now, the low death rate for the virus is certainly a thing to be thankful for, as a virus with more severe symptoms could have resulted in many more lives lost.

Thankfully, it seems that the virus is on the decline, at least slightly, though removal of quarantine restrictions could cause the rate of infections to bump back up. As a result of the quarantines and sickness though, there will be economic consequences. Of course China’s GDP growth has been speculated to be cut by nearly 3%, down to less than 5%. Of course, this would still be reflecting the state-given numbers. If we further adjust that the inflated numbers that some people suspect are boosted by up to 5%, we can see that in reality, China may be sitting near or below 0% average quarterly growth by the end of 2020. This will unfortunately have knock-on effects for the global economy. We’ve already seen reduced earnings estimations from a number of US corporations, notably Apple. Reduced earnings from service based businesses, especially theaters, being crowded public gathering spaces where illness could easily spread, will be hit particularly hard, as it will be difficult for those businesses to make up for the lost income during this time with consumers. As a result, the global box office numbers for 2020 have been lower proportionally to their domestic takes than what is typical, by nearly 10%. Usually a release in the US, upon international release will earn its domestic gross once more plus 10-30%. So far this year, the percentage is nearly 50-50 for foreign and domestic gross. This translates to tens of millions in lost revenue just for the US film industry.

 

Other industries, such as steel and manufacturing sectors will be hit by the virus, but at least have the ability to recover some of the backed-up production by performing overtime work and increasing capacity to meet the demand, though the longer that the quarantines remain in place, the more difficult it will be for production to catch up. Today’s more flexible supply chains mean that companies can more easily move their supply chains to other low labor cost countries, and will do so to a greater extent, the longer that this goes on.

First, the Chinese companies will absorb the first line of costs, then, the costs that they cannot absorb will be taken on by the US corporations further down the line, in an attempt to not raise prices, which can make margins very slim, before passing the remaining costs onto the consumers themselves. This process will take some time before US consumers really start to see the effects of this stateside. This fortunately means that with the exception of the already hurting US manufacturing sector, and some vulnerable service industries, the US economy likely won’t really feel the effects of this until late this year. However, while the impact that this has overall on the market and the economy might not be huge, it may push the US economy over a critical tipping point that we are approaching, along with the building consumer-debt and corporate debt crises that are looming on the horizon, we may find ourselves at the end of our long-running economic expansion.

Now, China has the biggest capacity to save their own business sectors, and by proxy, parachute this slow-rolling economic disaster. The easiest thing that they could do is subsidize businesses that were shut down during the quarantine. This could be direct subsidies, or it could come with some type of strings attached, but it is already clear that doing nothing would not only hurt the Chinese people and economy, but the downstream effects could be slowing the whole global economy.

 

Anyways, it had been a while since I had contributed anything to the global economic conversation. I can’t gloat about my correct predictions if I don’t write them down!