Here we are, in the fabled month of September, a
month that historically proves bearish for crypto. But what does this September have in store for us? Hello, I’m Crypto Casey and welcome to
another episode of Last Week Crypto. Every Sunday, we review the performance of
the largest cryptocurrencies, top gainers, as well as the latest global news stories
affecting the crypto markets this past week. This week we will discuss a few economic
events influencing the crypto markets, whether September will prove bearish or bullish
for bitcoin’s price, what just happened with the supply of ether, and how Wall Street could
be massively suppressing the price of bitcoin. This week’s episode is brought to you
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ask me anything you want, every Wednesday. Awesome. It’s time for Last Week Crypto. Looking at the top cryptocurrencies by market
cap, bitcoin up 1.9%, ETH on a tear, up 19.1% Cardano, finally cooling off a bit,
down 2.2%, and Binance Coin, up 0.6%. Looking at the top gainers this week: Bitcoin Cash ABC a top gainer yet again this
week, up an insane 287.3%, Fantom up 113.4%, IOTA, a blast from the past, up
71.4% and Solana, still crankin’, up 59.8%
____________ Nice. So let’s do a quick recap
of some of the less interesting economic events influencing
the crypto markets by proxy. As we discussed last week, did the optimism
surrounding the impending jobs report pan out? Eh, not exactly: Jobs report disappoints — only 235,000 positions added vs.
expectations of 720,000.
And Weak Job Gains Leave Washington on High Alert. The Federal Reserve and White House
had hoped for strong job gains, and the August report did not deliver.
That makes coming numbers critical. And “coming numbers” refers to the
release of the CPI or consumer price index report on September 14th that will
likely further stoke inflation concerns, which, in tandem with jobs report numbers, will
dictate what is likely to play out at the FOMC, or Federal Open Market Committee
Meeting on September 22nd. The to taper or not to taper conundrum in
the short term will resolve to the latter, meaning the Fed will probably
not start tapering any time soon. And by tapering, we mean that the Fed will
continue buying bonds to keep the money supply flush and interest rates, or the cost
to borrow money, pretty much non-existent. We’ve dug into that quite a bit over
the past few weeks, so basically it means bullish sentiment in the traditional
markets will likely continue in the short term: even though it’s becoming quite clear that
more liquidity is not having an impact on jobs, managing inflation, or anything really except
keeping reverse repo activity high and keeping the stock market propped up, which, by proxy,
keeps the crypto markets rockin’, for now.
Sweet. Next, let’s think about
if September 2021 will defy historically bearish performance or capitulate. So over the past 8 years, Septembers harbor
a negative 8% price decrease for bitcoin, with the exception of only two
out of the past eight years: In 2015, the price of bitcoin in September went up
4%, and in 2016 the price of bitcoin went up 7.5%. So, what about this year in 2021? Well, so far bitcoin has performed
contrary to previous year’s months. However, there seems to be a fairly equal split
between people with bull versus bear sentiment. Some are calling for a peak in
bitcoin’s price around September 27th where the golden 51/49% ratio predicts
the end of the bitcoin bull cycle. While others turn to the bitcoin
stock-to-flow model which predicts $100K per bitcoin by Christmas. Note here that we are
currently between a bottom and top here.
This model also predicts bitcoin could reach a floor
of $43,000 per bitcoin at the end of September. As usual, it’s anybody’s guess when trying
to predict the short term price of bitcoin and when the bull cycle will end, assuming
it’s still raging in the first place. So let’s break down this interesting revelation
I’ve been pondering this week into different concepts that paints an extremely bullish scenario
for the price of bitcoin short and long term. Concept 1: Equity vs Debt-based money Bitcoin is equity-based
money, meaning there is a real underlying asset behind the value of
the money determined by the free market. Before the US went off the gold standard, the US
was an equity-financed economy until 1968, meaning all of the debt borrowed by corporations outside
of the financial realm was backed by real savings.
Basically, the total dollar value of savings made
by individuals and companies in the real economy equaled the total amount of debt corporations
borrowed to grow their businesses. During this time, we were saving more of the
money that we earned rather than using it to consume or buy products and services.
So we consumed less than we produced. So during this time, debt in the US
economy was backed by real US dollars, and US dollars were backed by gold.
Hence the equity-based monetary system, where money was backed by underlying assets.
After we abandoned the gold standard,
the US turned into a debt-based economy and started using circulation credit,
or fractional reserve banking. If you’d like to learn more
about fractional reserve banking and the current structure of the
traditional financial ecosystem, check out my video breaking it down for
beginners’ by clicking on the link above. In a debt-based economy that uses circulation
credit, or fractional reserve banking, instead of debt being
completely backed by 100% cash, the banks are allowed to keep only a fraction
of the cash and lend out the rest in ad finitum. For example, let’s say for every
$100 you deposit into your account, per the fractional reserve banking system, the bank only has to keep $10 of the total
deposit and is allowed to lend out the rest. This fraction of deposits banks are required
to maintain are known as reserves.
So the $10 fraction of the $100 you deposit into
your bank account, is held as reserves. And the fraction of deposits banks are required
to maintain are known as reserve requirements. Hence the term, fractional reserve
banking. So, since bitcoin has garnered the attention of the traditional financial
sector, Wall Street has started to treat bitcoin, an equity-based instrument, as a
debt-based one by piling debt claims on it. Let’s explore this in our next concept. Concept 2: Real Demand vs Artificial Supply If you watch this channel frequently, you know
that prices of assets like gold and bitcoin are determined by supply and
demand. When demand is high, and the supply is low, we see
the price of the asset increase. When demand is low, and the supply is high, we will see the price of the asset decrease.
But there’s something interesting going on. Wall Street is treating bitcoin
the same way they treat gold, except in the scenario of
gold, they have the market cornered and can largely control it, for now.
However with bitcoin, it’s not the case at all.
Let’s talk about how Wall Street
has been suppressing the price of gold for years by piling debt claims on it, and how they have potentially been suppressing
the price of bitcoin using the same antics. The long and short with gold, is that there are
more paper claims to gold than actual, physical gold. Sure, people can buy and store physical gold
themselves, however most of the “gold” people own is just a paper saying they own “x” amount of gold
and it’s stored in some vault in another country. Thinking back to the relationship of the
price of assets and supply versus demand, imagine if the real demand for gold is being met
and satisfied with an artificial supply of gold. Yep, and that’s absolutely how the gold
market works. The upperhand Wall Street has in the gold market is they pretty much
own, operate, and control the clearinghouses. Wall Street controls most of the gold
in the world, and by Wall Street I mean all of the global banks. The central Banks and
the LBMA, or London Bullion Market Association, control most of the underlying
collateral gold – not individuals.
So as people want to redeem their actual gold,
Wall Street and banks can pretty much trade with each other and fulfill any demand
because they control the actual supply. This, however, is not the case with
bitcoin. The opposite is true with bitcoin, most bitcoin is owned and controlled
by individuals. But let’s talk about the similarities between Wall Street’s
relationship with gold and bitcoin first. Just like with gold, currently there are more
paper claims to bitcoin than actual bitcoin. How is it so? Well, with the
introduction of leverage, margin, and futures trading in cryptocurrency,
basically Wall Street applying old debt-based activity to an equity-based money system,
bitcoin is heavily rehypothecated.
But instead of Wall Street owning, operating,
and controlling the supply of bitcoin, in the event of a run on bitcoin, there absolutely will
not be enough bitcoin to fulfill demand, because most bitcoin is actually stored in privately owned
wallets off of exchanges and out of circulation. So let’s imagine a scenario where Wall
Street has largely shorted bitcoin, meaning they expect the price to go down,
but then, the price goes up and Wall Street is forced to close their positions regardless of
the price of bitcoin, that could be a problem.
Bitcoin is currently scarce on exchanges,
and during bull markets like what we are likely still in at the moment,
bitcoin gets even more scarce. If you had a big intermediary like Coinbase,
Binance, or Bitfinex with lots of open leveraged short positions experience a classic run on
the bank for bitcoin and there’s not enough of the underlying collateral to deliver, the
price of bitcoin could spike. Spike by a lot. These big institutions would be
desperately trying to find collateral that they ultimately wouldn’t be able
to get because it simply doesn’t exist. Wall Street and institutions do
not own or control most of bitcoin, and never will at this point.
too late when you look at the current amount of bitcoin in circulation and the
velocity with which new bitcoin is minted. So let’s think about it, if there is real demand
for bitcoin and it’s being met and satisfied by an artificially inflated supply of available
bitcoin, what is the true price of bitcoin? Well, it should be much much higher. If you
create an artificial supply of something, which Wall Street has done with
gold and is now doing with bitcoin, all else equal, the price
of the asset is suppressed. And if, but more likely when, a short squeeze
occurs, bitcoin hodlers will have the last laugh. This is why it’s so important to make
sure you are transferring your crypto off of exchanges to hold safely
in a cold storage hardware wallet. You can scroll down to the description
area below to access the correct and official sites of my recommended hardware wallets.
BC Vault is my personal favorite, another option is the Ledger nano backup
pack. So Scroll down to check them out. Protecting your ability to generate income so
you can buy more crypto is another important thing to consider. So if you’d like to learn
more about the advanced technical concepts of blockchain and become a developer in the
space, check out Ivan on Tech’s academy. If you use the link below, you can
access the academy at a discounted price, so scroll down, and check it out. Cool. And as if real demand for bitcoin
being met with an artificially high supply due to leverage and rehypothecation causing price
suppression isn’t exciting enough, check this out: More Ethereum Has Been Burned Than Minted
in the Past 24 Hours. EIP-1559 was supposed to bring deflationary pressure
to the network. It's working. Ethereum records negative daily
issuance for first time after EIP-1559 So as the bitcoin supply slowly
increases at about a 1.77% inflation rate, the ether supply
is shrinking, hence deflation. Imagine how much havoc an eth short
squeeze would have on the price. Awesome. Well that was Last Week
Crypto, with me Crypto Casey.
If you enjoyed the episode, please
make sure to like this video and subscribe to my channel for more crypto content. So what do you think of the possibility of
Wall Street suppressing the price of bitcoin? Is the short squeeze of all
short squeezes on the horizon? Could a WallStreetBets-esque effort to get as many
people as possible to transfer their bitcoin from exchanges to their own private wallets, and taking
advantage of a potential short squeeze possible? Let me know in the comments below. Be safe out there..