I know, I know…
You didn’t expect me to talk about cryptocurrencies…
But everything that’s trading in the markets sends signals. And that includes signals about where we are in the 18.6-year cycle.
The pain of the latest “crypto winter,” when bitcoin almost reached $68,000 per coin in 2021 only to drop to a bit over $15,000 within a year, is still fresh.
So, people just ignore it.
Which is a shame.
So what does bitcoin tell me?
Bitcoin Is Back in the News… So What?
The leading cryptocurrency has been making news lately.
It’s back in the headlines because there’s speculation that U.S. regulators are about to approve an exchange-traded fund (or an ETF) based on spot bitcoin price.
From the Financial Times:
Bitcoin’s surge has been driven by hopes that in coming months the SEC will resile its decade-long policy of refusing to approve spot ETFs, a stock market fund that hold bitcoins. Wall Street names such as BlackRock and Franklin Templeton have joined companies such as VanEck and WisdomTree in submitting filings with the SEC.
“The SEC accepting a spot bitcoin ETF application would validate bitcoin as an established asset class alongside all other asset classes,” said Ilan Solot, co-head of digital assets at Marex, a London-based broker.
This is huge… much bigger than a lot of investors think.
It tells me that the 18.6-year cycle is right on track.
But What Does Bitcoin Have to Do with the Cycle?
At the end of every cycle, there is a certain euphoria.
Liquidity flows freely, credit is available, land prices are up, the housing market is on fire, and stocks and other risk assets are doing well.
Bitcoin is the ultimate risk asset. It has no intrinsic value and trades purely on sentiment.
It’s also a mystery to many investors… like artificial intelligence this year or collateralized debt obligations (or CLOs) that were all the rage before the market melted in 2007.
These high-risk mystery assets are a barometer of where we are in the cycle.
High interest rates and scandals within the crypto area tarnished the appeal of these assets for a while… but now they are back.
If the SEC approves a bitcoin-based ETF, investors who want to buy it will be able to do so right away. An ETF like that is a perfect tool for measuring investors’ interest in the latest “mystery trade.”
And now, such a tool is likely to become available. Which means that investors who were afraid of losing access to their coins stored in an obscure way by untrustworthy people (remember FTX?) will now be dealing with the likes of BlackRock and Franklin Templeton.
This will remove a lot of friction and build a lot of trust between investors and ETF providers.
The market’s favorite mystery trade of 2021 is back. And my prediction is that investors’ interest (note that I didn’t say the price of bitcoin) will soar. That’s what the 18.6-year cycle says.
And that’s all I will be waiting to see to confirm that the cycle is developing as I predicted.
Will I be speculating in bitcoin myself? Probably not.
Do I have other options fit for this part of the cycle?
Of course. Join us to learn what they are.
Editor, Cycles Trading with Phil Anderson
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