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March
10
2018

Dow 12,000, Then Bitcoin $30,000
Andrew Keene

You may find this shocking, but I believe the Dow could drop to 12,000. And, as a consequence, bitcoin could rally to $30,000.

You read that right. How?

The writing is on the proverbial wall and the panic is setting in on Wall Street. And in markets around the world, for that matter. Don’t think for a minute that the one- or two-day rallies we’re seeing are a sign of things to come for the stock markets…

Because they aren’t.

The long-awaited market correction is here, and no matter how steep our new growth rate may be, or how low the unemployment rate number is…

Neither of these factors can stop the correction that’s coming because they had nothing to do with the gains we’ve all enjoyed since this longest of bull markets began back in 2009.

That was when the Federal Reserve began pumping trillions of dollars into the economy year after year after year, while keeping interest rates at record lows. Money has been cheap and plentiful for almost a decade.

But the days of Fed “bubble money” are behind us.

Not only is the Fed winding down its bond purchases, which has supported the bond market all these years, but three quarter-point interest rate hikes are on the 2018 calendar.

The first one likely to be announced at the March 20-21 Fed meeting. The markets will get hammered and undercut from both Fed policies.

And that leads me to my main point…

The next crash — which I believe will be here soon — will create demand for a new safe place for investors to put their money.

I believe that place will be cryptocurrency. Specifically, bitcoin.

But you’re probably wondering…

“How is bitcoin a safe place when it lost half its value since the end of last year?”

Sure, bitcoin saw a big run-up and then fell even further than the markets. But there was a huge difference between bitcoin’s surging prices and the Dow’s.

Bitcoin skyrocketed in value in 2017 because of its undeniably transformative impact on our world. You can’t say that about stock prices that for almost a decade have been inflated by phony Fed money and manipulated by derivatives trading.

The crypto “crash” on the other hand was a case of fear, not inflated value. The reality is that cryptocurrencies are full of real value that’s supported with deep investments by the biggest names in technology and banking. And they carry no debt.

Investors will flock to bitcoin in the next crisis, especially if sensible regulation legitimizes crypto in the minds of investors..

And that brings me to my next point:

There’s no correlation between stocks and cryptos.

Cryptocurrencies will impact the dynamics of any potential correction. That’s because cryptocurrency markets will give investors a new asset alternative where they can reposition their money.

Aside from the technological revolution that they’re driving, cryptocurrencies will seriously disrupt the relationship between the stock and bond markets as we know them.

That’s why investors searching for a safe place to hold their money and see it grow in value will look to bitcoin and other cryptos as a replacement for crashing stocks and debt-laden U.S. bonds.

It’s not that it might happen. It has to happen.

Let me be crystal clear here: the reversal of fortunes I see happening for the Dow and bitcoin this year has already begun.

The beginning of 2018 has brought about unprecedented volatility in the stock market. We have seen some of the largest single day selloffs in history, and as I noted above, that this could be the start of a major correction.

This market correction will have far reaching benefits for investors well positioned for the move lower, and dire consequence for those that aren’t.

How important a development is this new alternative asset to investors?

Well, I believe cryptocurrencies may well challenge gold as the preferred safe haven in uncertain times.

That may anger a lot of gold bugs. And I know a lot of gold bugs read The Daily Reckoning. But it’s not that I’m anti-gold — it has a great history as a safe haven. And gold is the most honest money known to man.

It’s more that I’m pro-crypto.

Why do I think cryptos could challenge gold as the preferred safe haven?

Gold is often negatively correlated to the stock market. This means that it often moves the opposite direction of the stock market, which is what a safe haven should do. But during the recent selloff in stocks, gold prices didn’t go up as expected. They actually declined along with the stock market.

Now, there’s a sound reason for that, as world-renowned gold expert Jim Rickards explains:

Gold typically declines in the beginning stage of a financial panic. This is not because gold is an unattractive safe haven; it is. The reason gold declines is that gold is always liquid at times when unwinding stock and bond positions may be problematic.

In distress, the old maxim applies: “You don’t sell what you want; you sell what you can.” Stock traders were getting margin calls on losing positions. These stock traders did not want to sell stocks into weakness. Banks needed liquidity to meet customer demands. For all of these parties, selling gold outright or posting gold as collateral is a reliable way to raise cash without selling stocks in distressed conditions.

I get all that. And we live in a time when the gold market is heavily manipulated, just like stock markets are. And the gold market is more a “paper” gold market than a physical gold market these days.

With that in mind, every investor needs to ask themselves one all important question:

“Where can I put my money when the stock market crashes again?”

If gold is that vulnerable to a stock market decline, there is only one logical answer to that question, as far as I’m concerned:

Cryptocurrencies.

In December 2017, JP Morgan analyst Nikolaos Panigirtzoglou said that “bitcoin may become the new gold.”

Again, I don’t mean to knock gold. But I also believe bitcoin has some incredible advantages over gold when a crisis strikes. Unlike gold, for example:

• It’s easy to store and takes up no physical space.

• You can send bitcoin around the world in an instant.

• Hundreds of thousands of businesses accept bitcoin.

• Anyone can buy bitcoin instantly.

In the event of a stock market crash, bitcoin therefore looks more attractive to me than gold. It should be no surprise that bitcoin has been viewed as a safe haven asset by its supporters for years, and the above factors support their arguments very well.

If you want to be prepared for a stock market crash, bitcoin may be the superior safe haven. And I believe a crash could be coming soon.

That’s why I believe that now is the time to position yourself in bitcoin and other cryptocurrencies, despite the recent dip.

Gold is good — but cryptos are better.

Regards,

Andrew Keene
for The Daily Reckoning

Andrew Keene is the editor of The Alpha Shark research desk at Agora Financial including the daily Alpha Shark Scanner PRO, the monthly Alpha Shark Letter and the bi-weekly CryptoShark Trader.

He’s also the founder of a seperate business called AlphaShark Trading which founded in 2011. 

Andrew’s worked as a proprietary trader at the Chicago Board Options Exchange. He began his career in the prestigious Botta Capital ‘clerk-to-trade’ program, and would eventually co-found KATL Group.

Keene’s an expert at actively trading futures, equity options currency pairs, cryptocurrencies and commodities. He is a regular guest market commentator on such networks as Bloomberg TV, CNBC, and Fox Business.

His moniker as The Alpha Shark is fitting because he’s in constant ruthless pursuit of any trading opportunity that will deliver his readers alpha.

He’s taught his personal strategies to over 50,000 students over the past 4 years. He’s a began a regular guest on CNBC’s Trading Nation, where he focuses on equity options markets and the trading insights they provide. You can also find Andrew’s contributions at Nadex and Money Show.

 

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