Bitcoin: Reasons Behind the Price Explosion and What’s Next?

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Bitcoins

Bitcoin’s unprecedented price explosion has many investors dazzled. In this post, we will take a look at Bitcoin: reasons behind the price explosion and what’s next.

Bitcoin: Reasons Behind the Price Explosion and What’s Next?

Bitcoin attained an impressive increase in 2020 in spite of numerous things that would usually make investors careful, such as the US-China tensions, Brexit, and, naturally, the covid 19 caused financial crisis. From a year-low on the everyday charts of $4,748 in the middle of March, as pandemic worries took hold, bitcoin rose to just listed below $30,000 by the end of the year.

Ever since it has reached all-time highs above $38,000, making headlines day after day and increasing the prices of other cryptocurrencies at the same time. So what has driven this enormous price hike and is it a far cry from the bubble of 2017?

One reason for the massive price hike is that there has actually been a huge increase in investors from dominant institutions such as pension plans, university endowment funds, and investment trusts. This was not the case throughout the last bull market in 2017, in which the bitcoin price rose up to nearly $20,000, only to relapse to the low $3,000 s a year later.

In 2017, the cryptocurrency community was dominated by individual small-time investors, many of whom were brought in due to Bitcoin’s shortage and the fact that it stood outside the worldwide financial system. The 2017 bull market had all the indications of a timeless monetary bubble and investors who were buying in “fear of missing out” (FOMO).

Bitcoin Moves Mainstream

This time, big names such as billionaire investor Paul Tudor Jones and insurance colossus MassMutual have actually invested large amounts of money, while even former skeptics like JP Morgan now say that Bitcoin might have a great future. All these developments help to increase trust in the cryptocurrency and show that bitcoin is now a mainstream asset.

Bitcoin has also been backed by some large consumer-facing payment organizations. PayPal now permits its customers to buy, hold, and offer Bitcoin straight from their PayPal accounts. Rival digital payment organization Square reported in November that more of its Cash App users are buying the digital currency, and purchasing more usually than in the past. The number of vendors using Bitcoin for their transactions is growing fast.
But wait, there is more. Visa is also taking a look at Bitcoin. In October it revealed a small number of bitcoin-related credit and debit cards with leading crypto exchange Coinbase. As the ways to use Bitcoin multiply, there is no doubt that the number of people who will want to hold it will multiply too.

There is no doubt that Bitcoin has actually become far more mature considering the days when it was utilized mainly as a technique to acquire drugs on the dark web on Silk Road. Bitcoin wallets, bitcoin keys, and exchanges are much easier to gain access to and there are much more trustworthy details out there than previously.

The introduction of commercial investment products such as bitcoin options and futures, as well as blockchain-related funds, has actually enabled investors who might otherwise have been afraid of volatility to get involved. Bitcoin futures indicate that investors can guess or speculate on falling prices by “going short” on the cryptocurrency. Nobel laureate Robert Shiller has recommended that the 2017 bubble might have been linked to the reality that there were no bitcoin futures at the time.

Bitcoin Protects Against Inflation

Besides all this mainstream enthusiasm, the havoc brought by COVID-19 caused economic crisis has actually triggered substantial stimulus packages from governments around the world and most central banks are printing large amounts of money. This will drive up inflation, which in turn reduces people’s buying power. Certainly, the United States Federal Reserve in 2015 signified it would be somewhat more tolerant of increasing rates when it relaxed its 2% inflation target.

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Inflation

In the face of this risk, investing in Bitcoin is considered to be a store of value. It is well known that there will be no more than 21 million bitcoins mined unless for some reason the protocol changes. Right now there are over 18,5 million bitcoins in circulation.

In addition, the supply of new bitcoins is likewise decreasing due to the fact that the reward that bitcoin miners receive for confirming transactions on the blockchain halves approximately every four years— it fell from BTC12.5 to BTC6.25 last May. This scarcity is comparable to that of rare-earth elements.

Furthermore, central banks are joining the cryptocurrency game. Russia, China, Canada, the EU, and lots of others are either currently dealing with reserve bank digital currencies (CBDCs) for their nations or releasing white papers detailing their intentions to do so. This is an apparent sign that the powers that be in the old monetary world are definitely seeing cryptocurrencies as the future. In the meantime, the Fed has revealed that retail banks can perform payments with stablecoins, which are cryptocurrencies pegged to conventional currencies.

What’s Next

For that reason, seems that the recent Bitcoin price hike may have more realism than in 2017. However, not everybody seems to share that opinion. Chief economist and strategist at Rosenberg Research and Associates, David Rosenberg, believes Bitcoin remains in a bubble, and financiers do not comprehend how it works.

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Market downturn

Rosenberg is well-positioned to discuss bubbles considering that he is understood for recognizing the United States real estate market bubble that caused the global monetary crisis of 2008-09. He believes investors have no idea how Bitcoin works and right now the classic, follow-the-herd bubble phenomenon is taking place (though he has admitted that he is no professional on the cryptocurrency market himself). Nevertheless, some large firm investors still worry that large volatility in the price could still be an issue.

So what to think? There are lots of very bullish projections for the bitcoin price in 2021. Tyler and Cameron Winklevoss, the creators of leading crypto exchange Gemini, are both adamant that Bitcoin will eventually hit $500,000 while a Citigroup analyst suggests a price of $318,000 by December 2021.

Final Words

There is no doubt these crypto-experts do know what they are talking about. However, my opinion is that these numbers may be too optimistic. Nevertheless, ten months ago the possibility of bitcoin reaching US$ 30,000 seemed hardly possible. Wherever the price goes from here, the fortunes of the leading cryptocurrency are plainly going to be among the world’s most significant financial stories in the year ahead.

I hope my article bitcoin: reasons behind the price explosion and what’s next, has been helpful. If you still have any questions feel free to write me a commend and I will get back to you.

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All Time High for Gold Price - What's Next?

All Time High for Gold Price – What’s Next?

Gold
Gold Bars

Within a month, gold’s price has reached all-time highs breaking all resistance. The yellow metal managed to break through the 2011 historical highs of $1.920. Everything is set for gold to continue its run and market analysts wonder if this is going to be the end of it, or if gold’s epic rally will continue.

According to the World Gold Council, in the first six months of the year, there was $39,5 billion invested in gold ETFs another all-time record high for gold. Investors only added 104 tonnes of gold in June and their total investments to a record high of 3.261 tonnes. The appetite for gold increased in July. As stated by the Bank of America, there was $3,8 billion invested in gold ETFs in the week between 15 and 22 of June. It was the highest amount of money ever invested in gold within a week.

If we integrate the latest data with the old historical data, we will come to an interesting conclusion regarding gold’s future price.

Gold’s best year for inflows was 2009 when there was a 646 tons increase. This record is already overthrown and that was done during the first six months of the year.

The amount of gold bought by the ETFs is colossal. It is larger than the amount of gold bought by the central banks for the years 2018 and 2019 together. It amounts to 45% of total world production for the first six months of 2020.

In 2009 when there was a record 646 tons of gold sold, the yellow metal went from $880 per troy ounce to $1.226. Two years later, gold surged to $1.920. Are we on the same path again, or not?

Every time there is a gold surge I always get asked the same question. Is now the right time to liquidate? My answer is: Do the reasons responsible for gold’s performance so far still apply?

Need for an Investment Refuge

The main reasons for gold’s price rally are:

1-The never-ending covid-19 nightmare. We have seen the second wave of the virus spreading like wildfire all over the world. In the States, the first wave isn’t over yet and things do not look good. There is not a single day without bad news. Record company losses, unemployment, companies shut down, zero consumer confidence, and so on.

2-The worsening trade relations between the two superpowers US and China are also bad news.

3-It will take almost a year before a vaccine or proper vaccine dealing with the virus is produced. The news from many research centers is not encouraging. For example, a study from the Frankfurt Hospital in Germany shows that a number of people who recovered from the virus have developed certain changes in their heart muscle, which make them susceptible to a heart attack. That means, there will be added strain on health centers for a long time after the end of the pandemic.

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To Secure Currencies from the Dollar

All Time High for Gold Price - What's Next?
American Dollar

During the last few years, many central banks acquired vast amounts of gold. In addition, the trend to “bring gold back home” has also been an indication of the coming changes to globalization and international cooperation.

When central banks buy vast amounts of gold, there is always a reason. They usually do it when they expect inflation to rise. Another reason is that they expect high monetary losses.

Gold will help a Western economy deal with tougher economic conditions and a possible currency crisis due to money printing and a repeated quantitative easing policy. For the rest of the world, gold buying is a way to keep some control over their own currencies.

We have seen countries such as Russia, Turkey, China, India, Iran, and so on acquire gold and secure it at “home” in their own facilities. Gold to them offers independence from the dollar, in case of a numismatic and a trade war. Gold gives their central banks the same opportunities as the Western banks.

Low Yields and Negative Interest Rates All Time High for Gold Price - What's Next?

The bond market now is trading at very low yields and in many cases at negative yields. Negative yields and low-interest rates result in low spending power. As a result, gold becomes attractive to investors because it is considered to be a store of value, and rightly so.

Final Words

The fundamentals for the gold rally are there. There is no reason for the rally to stop. I expect some consolidation to take place soon but I do not see gold slowing down. Gold feeds from uncertain and troublesome times and we are seeing that right now. Nevertheless, acting with caution and always being prudent without placing all eggs into one basket, is the best way to invest in today’s uncertain times.

The low yields, the negative interest rates, and the stock market downturn are threatening many retirement funds with extinction. Thus, the savings of a lifetime for good honest Americans are already slashed. To avoid further losses it is advisable to change your IRA fund into a self-directed gold IRA fund.

 

Gold is on Fire - The Facts

Gold is on Fire – The Facts

gold is on fire
Gold Bars

Last week’s gold rally has been outstanding. This goes to show that gold is on fire. Its run started on Monday from $1,810 and ended on Friday at $1,901 per troy ounce. Gold needs only 19 dollars to get over its record high of $1,920. Judging from last week’s performance this outcome is highly probable to take place in the oncoming week.

Reasons for Gold Rally

  • The oncoming US and China trade war
  • The falling yields
  • The growing economic uncertainty due to the Covid-19 nightmare
  • The weak dollar
  • The US and EU economic stimulus

The Oncoming US and China Trade War

The trade issues between the US and China did not start with the covid-19 virus. Prior to the pandemic, the two superpowers were fully immersed in a trade war.

In fact, the trade war started in July 2018 with the US imposing 34 billion in tariffs on certain Chinese products and as a result, China followed suit. The trade war did not stop there and by the end of 2019, the Americans had imposed a total of 450 billion dollars in sanctions. The Chinese responded with a total of 170 billion dollars in sanctions.

This year the Chinese have been accused of the way they handled the coronavirus crisis and rightly so. President Trump is one of their critics.

The US-China relations saw another escalation last Friday, when China retaliated for Houston’s consulate closure, by ordering the US to close its consulate in the city of Chengdu.

No doubt this action added more fuel to gold’s engine.

The Falling Yields

Gold is on Fire - The Facts
Empty pockets

High-grade fixed income plays an important role in a modern investment environment. It tends to be safe, more liquid, and a less volatile asset.

Nevertheless, right now bonds are trading at very low yields even negative yields. In fact, there are trillions of dollars trading at negative yields. This is due to the quantitative easing policy adopted by the European central bank and by the Fed.

This has pushed many investors away from the bond market and forced them to place their capital in profitable assets. Gold is one of them. If we take a closer look at gold, we will see that gold was trading at around $1400 per ounce before the end of 2019. Last Friday gold jumped over the $1,900 mark. In addition, analysts expect gold to continue its rally before consolidating.

The Growing Economic Uncertainty Due to Covid-19 Nightmare

Gold is on Fire - The Facts

There is no country in the world the global pandemic hasn’t touched. In the beginning, we all thought we could deal with it easily by shutting down and staying at home. It didn’t work. Unfortunately, over 14 million people have been infected worldwide, and over 636,000 have lost their lives.

In the US the nightmare doesn’t seem to come to an end. The number of those infected is on the rise. In Europe, the second wave is on the way. Spain yesterday reported 8,000 new infections, while there is also concern In Italy, France, Germany, and many other countries.

The damage to the global economy is enormous. Trillions of dollars have been lost, large corporations have gone bankrupt, and many more are facing an uncertain future. There is no end to bad news as LinkedIn announced job losses. The Microsoft-owned firm will be letting go of around 960 jobs across the globe, as the pandemic has reduced demand for its recruitment products.

The Weak Dollar

Gold is on Fire - The Facts

The US dollar is down on its knees. At the moment it trades at 0,86 and it looks like it will stay there for a while. The dollar’s downturn came as a natural consequence of the government’s and Fed’s massive money printing program.

The weak dollar makes it easier for international investors to buy gold and silver because the cost is significantly lower. Increased international demand boosts gold’s value.

The US and EU Economic Stimulus

The Americans and the Europeans have announced massive economic stimulus programs to deal with the covid-19 devastating effects. The US government has already carried out a 2.3 trillion stimulus program and is just about to introduce an additional 1 billion program. This will actually raise the national debt to $26.5 trillion dollars, or 132% of the national domestic product. (GDP)

On the other side, the EU has agreed to spend a $2.1 trillion stimulus package. The Europeans will raise money by selling bonds collectively rather than individually, which then will be given to member states. Most of it will be grants given to countries without them having to pay it back.

Those enormous economic stimulus programs are a way for the US and Europe to deal with the coronavirus’s massive economic blow.

All additional fiscal stimuli introduced around the world will give gold a further boost.

Final Words

  1. The never-ending US and China trade conflict will continue for a while and as the election date is getting closer, President Trump could actually step it up if he thinks he could get more votes out of it.
  2. The quantitative easing policy will continue for at least the next couple of years, which will push more investors out of the bond market and into precious metals.
  3. The coronavirus nightmare will be dealt with only after a vaccine is introduced and that will be no earlier than 2021.
  4. I do not see the dollar recovering before the end of 2020.
  5. The US and EU economic stimulus are here to stay and that will push gold’s price further.

My opinion is gold and silver will continue to rally, but not for long. There will be some consolidating in the following weeks and then I expect the rally to start again, as the fundamentals are right therefore, now is the right time to invest in gold.

Additional reading:  Investing in gold July 2020

Investing in Gold

Investing in Gold

investing in gold
coins

End of June 2020 the Western world is trying to recover from the COVID-19 lockdown. How much is the damage caused by the coronavirus and how this economic shutdown will affect the markets remains to be seen. Is there going to be a quick recovery, or there will be a recession? Where should I invest my savings now? Investing in gold now in July 2020 could be a good move.

The Stock Market is Inflated

When the market crashes you get a W move. Very rarely you will get a V move and yet, if we look at the economic numbers, they are catastrophic, but we are back to all-time highs. There has to be a reason for that and there is.

The central banks, Fed, ECB, and Asian banks have been pumping vast amounts of credit into the economy. That is what is pushing up equities. The market is telling us these market highs are due to a large amount of inflation, caused by liquidity the central banks have created. It is not the market rising, it is the value of money forming.

50% Inflation for the Next 5 Years

investing in gold

The only reason stocks are so high is because inflation is coming. If inflation is on the way, where do you put your money? Many investors and financial experts say gold and rightly so. Most investors are small, they do not own large amounts of credit. However, billionaires, fund managers, and so on only have one place to put their money to get away from inflation and that place is equities.

We have seen equities so high because the central banks have baked in a 50% or maybe 100% rise in inflation over the next four to five years. In other words, the big money is trying to protect themselves from that inflation by going into equities which by definition will rise from inflation.

If you believe there will be deflation, all you have to do is to hold on to your cash. If you think inflation is on the way, cash is not useful because it will lose value. The Fed believes there is a strong possibility for a 50% to 100% increase in inflation over the next three to four years. That is a huge number and it will affect everyone. For example, if you are planning to take a holiday to an exotic location with your retirement fund, you will not be able to afford it. You will probably take a holiday to a cheap resort nearby. In a few words, your purchasing power will drop substantially.

>>>>>>>press here to see how you can protect your retirement fund from the financial crisis

Business Collapse and Unemployment

Investing in Gold

Market bulls argue the market is already recovering. Shops are opening, factories are back in business, restaurants are opening too, stocks are holding up, and so on.

They are totally wrong. Unfortunately, unemployment levels are massive and still growing. Several airlines already declared bankruptcy. Some of them are Avianca from Colombia, Virgin Australia, Trans States Airlines from the US, Compass Airlines from the US, and many others. Rolls Royce announced 9000 job losses in the UK, Nissan shut down its Barcelona plant in Spain with 3000 redundancies, and another 25000 jobs were indirectly threatened.

In the US the news is not good either. The country has lost 20,6 million jobs since mid-March, resulting in an unemployment rate of 14,7% a level not seen since the great depression in the 1930s. I am afraid, there will be more business collapse and more unemployed in the following months.

The recession is going to be bigger than the 2008 recession. It will take years for the world economy to recover not months or weeks. The numbers are already massive and still growing. As I just said, the economy is not going to be back to where it was within a year that’s for sure. So why is the stock market still high? What is that’s still driving equity prices? It is the Fed’s liquidity.

Everyone is Printing Massive Amounts of Money

investing in gold

The Fed and its proxies are doing it one way or the other. They are squeezing people out of the bond market indirectly, by enabling certain parties to buy equities, support the market, and support liquidity.

It is important to support equity prices because that supports employment, supports the middle class and it also supports the rich. In addition, it is also important to support the property market because it supports the middle class.

If you let stocks, bonds, and property go down you will have an economic collapse. Anyhow, we already have an economic collapse and this is called unemployment. The Fed and the government are propping up the rest of the economy by printing money, which is exactly what governments did for hundreds of years, to deal with similar issues. Pumping money into the economy and in the end creating inflation. In fact, inflation has always been the end result.

Inflation isn’t going to be a US economic issue. It will be a world economic issue as the rest of the world is also printing and pumping money into their economies. For example, the Europeans have decided to pump almost 3 trillion euros to aid their economies.

Covid-19 is Coming Back

I am afraid our COVID-19 struggle isn’t over yet. There is already the second wave in the US and the markets are already distressed. From 18,000 infections a day a week ago, we are now to a record 40,000 infections a day. That will add more strain to the weak economy, as there will be an extension to lock down in many states across America.

Nonetheless, there is not going to be a second lockdown, not in the States and not in the rest of the world. The reason for that is that nobody can afford it. A second lockdown will take us back to the stone age. Western democracy cannot operate with lockdowns, as lockdowns diminish tax revenue. The state cannot support its social policies. (welfare, education, public housing, health, and so on.)

Support the Real Economy

Investing in Gold

Every time countries cannot raise tax money, they print it and that leads to inflation. The Fed will argue that a 50% inflation over 5 years is nothing to the economic meltdown that was coming and that is partially correct.

I would argue that the Fed shouldn’t be throwing billions of dollars into stocks. Last week the Fed injected over $60 billion into the markets. That is a massive amount of money to spend in a week’s time. There will be a time when easy money for equities will not be around and then equities will take a dramatic downturn. Supporting the stocks is vital, but only up to a point. What is more important is to support the real economy out there. The real economy is real jobs, real growth, and prosperity for everyone.

The Fed will continue to print money throughout the year and this will continue for 2021. The Fed also will not raise interest rates for the next couple of years as their quantitative easing policy is well on track.

Gold Offers Stability and Growth

Volatility is the new reality for the market. At this time gold and silver can offer, stability, protection, and growth. Gold has always had a strong second half of the year. We’ve seen it over and over again for gold, to finish the year with a good rise. The yellow metal is expected to move higher. It is already building nicely at the moment but I do not expect gold to get over the $2000 mark this year. Gold is expected to do well in 2021 as well. Beware though, gold is weak before any elections, we might see gold slowing down in Autumn.

Geopolitical tensions always give gold a boost. The Chinese Indian border clashes, the North Koreans are back and Turkish ambitions in the Mediterranean Sea could drive gold’s price further. I would also like to mention silver. At the moment I consider silver a good investment.

Moreover, I would like to mention bitcoin. For me, bitcoin is digital gold. You can buy it fast and sell it fast and you can have it in cold storage virtually in your basement.

Final Words

Credit expansion and monetary stimulus are driving the market into new highs even though, we are in the middle of a covid -19 caused recession. We are seeing the stock market not follow the economic downturn. The market is now addicted to never-ending credit, is asking for more and getting it. Inflation is coming, we expect at least 50% inflation for the next 4 to 5 years. But, there will be a time when easy money runs out, and then, things could get ugly.

A prudent down-to-earth investor always has a percentage of his portfolio invested in gold to protect his savings from inflation, economic crisis geopolitical tensions, and so on. In these uncertain times, gold is a good bet to safeguard your life savings from the economic recession.

 

Gold in Short Supply-What's Next?

Gold in Short Supply-What’s Next?

gold in short supply
gold storage

Gold is in short supply because metal producers are reducing gold production due to government restrictions in response to COVID-19 concerns. The coronavirus also caused all European precious metal refineries to shut down and disrupted transportation. 1/3 of NYSE-listed gold mines have withdrawn 2020 production guidance. The South African government imposed a 3-week shutdown of the country, which means temporary mine closures.

Gold in Short Supply

Metal Mines Shutdown

In particular, South African prime minister Cyril Ramaphosa has imposed a 21-day lockdown on all mining activities, after a surge in coronavirus cases. South Africa is a leading producer of metals and minerals such as silver, platinum palladium, coal, gold, and iron core. To be precise, 70% of global platinum comes from South Africa along with 40% of palladium.

Gold mining a labor-intensive mining industry is a potential hotbed of infection among the thousands of miners, who often work in confined spaces, with some living nearby in cramped accommodation. Meanwhile, furnaces and underground mines will undergo a maintenance program, to make sure mines will be in a condition to reopen in the future.

In addition, many more mines around the world paused production. For instance, the Mponeng mine in Argentina, the Cero Corona mine in Peru, the Salares Norte in Chile, and many more others. Furthermore, global mining giants Anglo-American and Rio Tinto have reported production slowdowns, all due to coronavirus-related restrictions.

More Supply Concerns

The miners’ lockdown isn’t the only reason for the precious metals supply shortage. Coronavirus has caused all European gold refineries to shut down due to government orders. With online shops out of stock and many of the passenger planes that move bullion grounded, physical gold is becoming harder to track down.

Right now, anyone looking to buy physical gold has an issue. The supply problem due to transport and processing capacity has been worsened by a surge in demand, as investors seek the safe haven asset amid the global oncoming economic crisis.

Fewer people are selling gold back to dealers despite the excellent gold prices. Those who want to sell are finding it difficult because of restrictions on travel and stocks. The gold in short supply problem is here.

Print More Money

Gold in Short Supply-What's Next?

The response by politicians and central banks to print huge amounts of currency, (money) in order to keep their economies out of trouble, will cause the intrinsic value of money to fall. That means consumer purchasing potential will be reduced. In other words, you will be buying less with your dollar, euro, pound, etc.

Conclusion

The shortage in gold supply triggered by miners’ shutdown, the European refineries closures, transportation problems, and the never-ending appetite for gold, will result in a price surge. All other precious metals, silver, platinum, and palladium will follow too. In addition, the out-of-control money printing policy adopted by central banks ensures the precious metal price boost, is here to stay. If you are thinking of buying physical gold, now is the time, as there are reports of shortages in some coins, Krugerrands from South Africa, and Maple Leaf from Canada.

If you found my gold in short supply article useful do not hesitate to let me know in the comment section.