Bitcoin has been consolidating in price for the past week and things are looking very positive after Elon Musk announced Tesla will now be accepting Bitcoin for car purchases in the USA and soon the rest of the world.
On the surface this news is something we already knew would happen. However, Musk has made the decision that Tesla will not be selling any of the Bitcoin they receive as payment. This will go into Tesla’s treasury and be stored for the future.
This is a clear indication of what Musk expects will happen with Bitcoin over the coming years as Tesla are treating Bitcoin as a long term hedge against the rapidly inflating US dollar.
If you follow my videos on YouTube, you will have seen my unwavering bullishness on the price of Bitcoin. To explain it quite simply, the market has never been more fundamentally bullish than it is now.
Start-ups are not struggling to raise funds, institutional investors are panic selling dollars for Bitcoin. They are also investing in cryptocurrency and blockchain infrastructure to benefit their investments, which is something we have never seen before.
Bear market incoming?
The combination of high net worth individuals and institutions investing into Bitcoin and its infrastructure tells me that this bull run does not look like it will be followed by a bear market as many are expecting.
I expect this is a Bitcoin supercycle and, instead of a huge drop in price, it seems more likely that the price will continue growing slowly, eventually leading to a plateau.
The most concerning thing about Bitcoin right now is that the daily chart has been printing a bearish divergence since the first time Bitcoin hit $40,000.
This points towards a possible longer period of consolidation that would perhaps coincide with lockdowns ending and a sudden drop in interest in Bitcoin as everyone starts to resume normal life.
However, a consolidation period such as this would only be brief. Governments all around the world have adopted money printing as the only way to solve their financial problems, meaning fundamentally people will continue investing in Bitcoin in the long term as a store of value.
Still, if the price were to drop, it would make sense for this to follow a peak in interest right before lockdown in the UK ends.
US dollar looks rough
There has been a strengthening in the value of the US dollar over the past week since stimulus has been printed but in my opinion this will not last very long.
The reality of the situation is that no matter how much money is printed, things will not be normal for a very long time.
Global recovery from this crisis is likely to be slow and the financial implications are only just kicking in.
Bond yields are at tipping point
Government bond yields are not going to rise as much as was hoped after stimulus, making the deficit between inflation and bond yields over one per cent.
To the average Joe, one per cent does not mean that much, but one per cent means a lot to hedge funds and money managers all around the globe.
A one per cent deficit means that all holders of cash are now losing buying power against inflation. This is driving up the price for land and any asset-based store of value that is not Fiat currency.
With this being a slow onset crisis, this trend is likely to continue over time. This is the key to understanding my long-term expectations on Bitcoin.
What comes next?
If there are fewer jobs in society, there is less demand for debt from companies and individuals alike.
Mortgages and loans become harder to obtain due to the uncertain circumstances. Governments rely on debt demand to maintain the value of their debt-based economy and in the long term, debt-based economies are not sustainable as the numbers are too volatile and the currency inflates too much.
Look at the Turkish Lira for example. It lost 14 per cent of its value in a single hour this week – the same could happen to GBP, EUR and USD at any time.
Your money is not safe in a bank if there is a collapse in the structure upon which the value of the money is built.
But what about Ethereum?
Having covered Bitcoin, you may be thinking – where does this leave Ethereum?
Ethereum has been underperforming. It seems to be struggling with scaling due to insanely large transaction fees and still being inflationary.
Soon Ethereum will switch to being deflationary when an update known as EIP-1559 is implemented in a couple of months’ time.
I expect this deflationary switch to be a turning point in the history of Ethereum. It will make Ethereum scarce money, and as the transaction fee problem should be solved by the Berlin upgrade to the Ethereum Network, I think Ethereum is very close to its bottom in terms of its value in Bitcoin.
Overall, the market is looking healthy. Things are looking bright and rosy for Crypto and it looks like there is a lot more growing to be done during this phase of Bitcoin growth.
Ethereum will start catching up soon, providing all the new improvements to the network go ahead as planned and who knows, this could be the biggest bull run crypto has ever seen!
TMG ‘That Martini Guy’ is a British cryptocurrency trader and YouTuber who publishes daily Bitcoin & Crypto videos on YouTube. In the crypto space since 2013, he has vast experience in both cryptocurrency bull and bear markets having experienced nearly every single one in the history of Bitcoin!