Growing distrust in central banks and centralised finance was the driving force behind the creation of Bitcoin after the financial collapse of 2008. The situation has become even more dire since then. The meteoric rise in price of Bitcoin is testament to this. The more people that buy and hold Bitcoin, the more freedom people will have.
El Salvador clashes with IMF
El Salvador recently reported that they will make Bitcoin legal tender. In consequence, the IMF which provides loans and grants to countries – essentially the Federal Reserve Bank for the world – is going after El Salvador by giving them a warning about making Bitcoin legal tender.
On the surface, the IMF says El Salvador’s decision raises a number of macroeconomic, financial and legal issues that require very careful analysis since they claim crypto assets can pose significant risks, therefore effective regulatory measures are very important when dealing with them. In reality, the IMF is running scared of eventually being made redundant.
If the IMF does not get its way, they can then decide to curtail relief packages sent to El Salvador and any other country that chooses this path. In reality, the IMF and World Bank are concerned countries could break free of the need for their existence as other countries pile on such as Argentina, Brazil, Mexico, Columbia, Paraguay, and Panama while Bitcoin’s value continues to exponentially rise over time despite two 94 per cent corrections and multiple corrections between 80 to 90 per cent since 2010.
These are countries where millions have suffered massive loss of buying power from their often plummeting currencies. Many remain unbanked. Their respective economies are unstable. Even India is now doing a 180 by considering Bitcoin as an asset class of its own within their financial system which could make it exempt from India’s ban on doing business with cryptocurrencies.
As with India, both Russia and China have banned various aspects of Bitcoin over the last decade but then had no choice but to lift some of their bans.
Connected to the IMF’s warning, both the IMF and World Bank are pushing the ESG initiative. ESG stands for Environmental, Social, and Governance. ESG focuses on environmental concerns such as global warming. Many banks and institutions are supportive of ESG including Blackrock, Merrill Lynch, JP Morgan, and Bank of America because it indirectly gives them more control over the flow of money.
ESG scores are kept on individuals which can affect one’s credit rating which then impacts the odds of an individual getting a loan or a mortgage. The ESG score of an individual or company may drop if Bitcoin is bought. Companies with low ESG scores can also be penalised with higher interest rates on loans due to lower credit ratings. Various research papers have studied the effect of environmental, social, and governance (ESG) performance on credit ratings.
It comes as no surprise that Bank of America does not allow their customers to buy Bitcoin while Merrill Lynch’s Edge, the firm’s digital investment service, adds ESG scores to its client dashboard. Billionaire Chamath Palihapitiya who believes in climate change said ESG is a fraud as it does little to contribute to reducing emissions, but instead could enable major companies to borrow at negative rates of interest if their ESG rating is sufficiently high. Ultimately, ESG scores could be used to try to curtail the buying of Bitcoin.
Nevertheless, Shark Tank’s Kevin O’Leary expects a flood of institutional money into Bitcoin when ESG standards are met. While this makes sense, it could take a number of weeks or months to reach this point, an eternity when it comes to the breakneck speeds of the cryptospace, so in the meantime, the various headwinds Bitcoin faces could pressure its price, so it could trade sideways, retest lows, or even break below recent lows around $30,000.
The world has seen how governments controlled the movement of individuals across most countries when COVID hit. What would stop governments from using ESG as a form of control against Bitcoin? The Basel Committee on Banking Supervision released a report that cited risks including market and credit risk, fraud, hacking, money laundering and terrorist financing.
Bitcoin’s metaversal anti-fragility versus FUD
The ESG is not Bitcoin-friendly as they subscribe to the wrongheaded belief about Bitcoin’s energy consumption. Bitcoin has mistakenly been accused of using too much energy to mine. Yet no one talks about the far greater amount of energy it takes to mine gold, or put up Christmas lights, or operate the outdated legacy banking system.
I discuss the whole matter HERE. But wrongheaded views by who I call the “flat-earthers” are as old as the hills and affect legislation. We have seen this countless times. Two examples of many were witch hunt crimes such as the red scare in the 1950s which destroyed the careers of many and “reefer madness” in the 1960s which made marijuana the devil’s drug and spawned many anti-drug laws.
Most recently, COVID misinformation and disinformation was used to lockdown much of the planet, so Bitcoin’s energy consumption could be used as a way to curtail institutional investment in Bitcoin. ESG, G-7, World Bank, Basel Committee, and FinCEN together with big institutions who slow their buying of Bitcoin due to energy consumption issues could create a perfect storm. Bitcoin retesting or undercutting prior lows of $30,000 could occur, but due to its robust, sustained tailwinds, this would be a significant buy point.
Indeed, Bitcoin’s on and off-chain metrics are strongly bullish along with a number of major technical indicators signalling deeply oversold or critical bottoms, many of which I have cited in prior reports. Nevertheless, I have always advised selling on price/volume action, depending on one’s time frame, fundamentals be damned. Metrics help light the way as they so far have been good at identifying whether the bull market is over or not. With Bitcoin, I use technicals over longer time frames to avoid getting whipsawed.
In the year 2000, stock fundamentals looked as good as could be, but March 2000 was a clear sell signal. I had no idea the big dot-com bull was over until later in 2000, and found myself making nearly no trades over the next three years while the worst bear market in the history of the NASDAQ unfolded.
Of course, when it comes to buying, I have also always said I buy based on BOTH technicals and fundamentals and, when it comes to crypto, making use of on and off-chain metrics to gauge the size of your exposure to cryptocurrencies.
We are currently rhyming with the three major corrections exceeding -50 per cent in Bitcoin that occurred during bull markets since 2012: mid-2013, mid-2017, and Mar-2020. Metrics overall remain bullish as they did in those prior corrections. Early 2018 was different in that my metrics gave a major sell signal in Jan-2018, the first such signal since early 2014. Since the major buy signal in Mar-2019 issued by my metrics, I have yet to see evidence of a major sell signal.
Michael Saylor received $1.6 billion in recent offers from VCs and hedge funds as they want to accumulate Bitcoin, so Microstrategy is increasing its position in Bitcoin by at least $1 billion. As for Saylor being forced to sell BTC as its price drops, this link clears up this FUD: https://twitter.com/hodlKRYPTONITE/status/1402151791173672980?s=20. Despite this and other matters of FASB accounting, many still cling to their mistaken notions when it comes to Bitcoin. It’s like 2013, 2014, 2015, 2016, 2017, 2018, 2019, and 2020 all over again, and reminds me of leftists who go cognitively dissonant when it comes to understanding and accepting higher order effects from the Covid lockdowns since early 2020, but instead resort to ad hominem attacks including “Well, if you don’t understand my point, you’re not worth my time.” 😉
Dr Chris Kacher, bestselling author/top 40 charted musician/PhD nuclear physics UC Berkeley/Record breaking audited accts: stocks+crypto/blockchain fintech specialist. Co-founder of Virtue of Selfish Investing, TriQuantum Technologies, and Hanse Digital Access. Dr Kacher bought his first Bitcoin at just over $10 in January-2013 and participated in early Ethereum dev meetings in London hosted by Vitalik Buterin. His metrics have called every major top and bottom in Bitcoin since 2011. He was up in 2018 vs the median performing crypto hedge fund at -46 per cent (PwC) and is up quadruple digit percentages since 2019 as capital is force fed into the top performing alt coins while weaker ones are sold.