Bitcoin Via Shanghai: A Chartered Course of Peril

You’ll know there’s real danger ahead the moment those in charge vociferously commence to assure everyone, “there is no danger.”

The above is my take combining a few old maxim with similar meanings. i.e., “You’ll know a politician is lying when their lips are moving,” “You’ll know there’s a problem when the government says, ‘there is no problem,'” or “when early adopters are telling/selling everyone, ‘it’s not too late to get in,’ is probably when you should be getting out,'” et cetera.

The above is relevant to keep in mind for this reason:

The Shanghai Composite Index™(SCI) of late, much like Bitcoin, has been exuding similar reactions by its defenders, i.e., China’s politburo and media class, and/or early adoption gurus and HODLs. The main difference is this:

One wipes out the fairytale fantasy that anyone with a “miner” can create wealth and currency ex nihilo in their mom’s basement then, buy a McMansion with a garage full of Lambo’s and retire.

The other: wipes out the very real fairytale where central bank intervention creating actual currency ex nihilo, allowing for it to be endlessly “mined” (i.e. rehypothecation) to finance construction projects, businesses, stocks, ________(fill in the blank) that would make Charles Ponzi blush, has the potential to bring down an entire house-of-cards and fantasy central banks have created globally – along with wiping out much of everyone’s “booked” retirement or net worth. i.e., those that only take their clues from the “gurus” and/or mainstream business financial media. aka, “Sheeple.”

That’s a pretty big statement, so let me explain my reasoning…

Bitcoin, regardless of whether one believed all the hype or not, performed an amazingly brief, yet meaningful live exercise in what happens when, for lack of better words – the thrill is gone.

Early adopters push and praise why it can only go higher, early investors with large “wallets” join the chorus and jump in looking for a free-ride to quick bucks, then “gurus” begin telling/selling how the average can now make millions, easy-peasy, if they’ll just “buy a ticket” to enable them a seat on this bandwagon.

Then – it all falls apart – where everyone is now stuck, Holding-On-for-Dear-Life as an out-of-control, careening bandwagon heads relentlessly down the ravine. That is, everyone except the band, for they, more than likely, sold the passengers their own personal “ticket,” at a “bargain,” of course.

This experiment with Bitcoin is instructional for this reason: It was allowed to react via price fluctuations, both up and down, with no central bank intervention as to adulterate the signaling transpiring within. i.e., whether one agrees with its premise for disruption or not, doesn’t matter. It has behaved more inline with how many assume a market is supposed to behave rather, than the adulterated-central bank-pervision of capital “markets” we are now enduring.

With that said, what’s now beginning to finally transpire is this: the more central banks take their foot-off-the-pedal – the more the “markets” are slowly exuding behaviors, more in line, with reality based market moves.

And nowhere is this phenom more prominent – than in both the currency market, along with what is known as, the emerging markets. And it is here, much like when Bitcoin began to show signs that, “the thrill is gone,” so too is this happening in these most volatile markets. (Think, Brazil for just one)

Again, the problem here is, “thrill” begins morphing into another matter entirely, for the consequences go from affecting only a small group such as Bitcoin – to wreaking havoc across entire global markets via contagion fears. i.e., when “thrilling” transforms – to frightening.

This is what I believe the SCI appears to be signaling. And if I’m correct? The inferred insinuations are just that, frightening, no hyperbole intended.

Let me demonstrate the case I’m laying out using what “The Valley” likes to call a “picture.” To wit:

(Source)

From a technical perspective both of the above are showing a very troubling potential. i.e., Much lower prices ahead.

The reason why these two markets matter for example purposes is this: Once their respective “peaks” had been traversed – the ride down has been far more “frightening” to those getting in on the down-slope, hoping for a sudden “chair-lift” to magically appear and propel them to ever higher peaks.

But when that “lift” never appears, or appears  to then suddenly break, leaving many just stranded with no way off? They do just like they do in real life: calculate just how much it may or will hurt – then – they jump.

If you look at the above chart, with that in mind, what you are beginning to see, in my opinion, is that “jump” moment playing out.

So why is the above relevant you may be asking? Fair question, and it is precisely whose “picture” the above represents. Again, to wit:

As you can see the one on the left is Bitcoin at the time of this writing, the other is the SCI via the same.

Bitcoin’s bars/candles are representing daily intervals, the SCI’s are weekly. Yet, both are alluding to similar conclusions. i.e., much lower prices ahead, along with both quickly and soon – possibly very quickly and even sooner.

No one knows what will happen, or not. But to think this isn’t a waiting game that demands one’s full attention is folly at best, and moronic at worst. But what’s really important is how those that believe they have direct influence over such matters react, or not.

With Bitcoin you had the equivalent of the “governing bodies pipe organs” take to the airwaves and conferences to profess that any and all down ticks have been the manna-from-heaven you’ve been waiting for as to now afford you the chance to “grab your ticket” onto this bandwagon of untold riches to come. Think John McAfee, Tim Draper, Tom Lee et al., forget the “gurus,” i.e., James Altucher and others, they appeared to have already bailed.)

The problem is, in spite of all this – it keeps falling.

With the SCI there’s not too much of a difference. The only thing is, that it truly is the governing bodies, e.g., the politburo, that is coming out to defend against any inferences of instability.

The issue with doing just that, is this: every other government and central banker (whether credible or not) is professing that the time to raise rates and intervene less, is precisely now, while in the midst of a global recovery. China – is now needing (or at least appearing) to be doing the exact opposite. i.e., Needing to intervene even more while professing everything is just hunky-dory with an announcement before this evening’s (morning in Asia) market open, that their central bank will cut the Required Reserve Ratio for some banks beginning in July – just two months following a similar action.

Hint: That’s not something one does to show strength rather, it implies weakness. And that should be sending off alarm bells everywhere. However, if one listens carefully – the silence is deafening.

As I stated last Sunday, the market to watch for those looking for clues, is Asia, in-particular China, which opens at around 9:00pm ET. (Barring any unforeseen holiday!) And that remains even more true this Sunday, than it was last.

The announcement of the RRR cut, coupled with the markets ongoing price action, has many a tell-tale sign that something is amiss. Whether, or how this all plays out is still anyone’s guess. But that doesn’t exempt those looking for clues from not pay attention to this occurring development, for the stakes for immediate contagion effects are enormously high.

But if there is one prediction that does have a fair shot off being correct, I feel, it is this one:

I predict a plethora of “slightly used miners” to be increasingly prevalent on both Craig’s List™ and/or Ebay™. And soon, as in very.

© 2018 Mark St.Cyr