I am going to post something quite unpopular. It will make some people mad at me. This is not certain, but I would say it is a 50/50 probability right now. I sincerely hope I am wrong, but I am worry that I am not.
The US has dun goofed its coronavirus response. The US locked down too slow, and now it is reopening up too fast. With the exception of New York, case rates are still rising in every state. Nebraska, which reopened on Monday, reported a 57% case rate rise in the past 7 days. In saying this I acknowledge that testing levels are so low it is hard to work out what is really happening except we know there are superclusters at the meatworks which are not closing because they have been deemed essential.
We have extremely bad economic data. On some readings, the data is worse than the Great Depression. This puts the political leadership at both State and Federal level under enormous pressure to reopen. So I can understand why they are doing it, particularly given there is not the appetite for the social welfare schemes which have been rolled out in other countries to support workers staying in their jobs.
But know this. By half-arsing the lockdown and pulling out too early, and then triggering a crushing second wave in late summer / early fall, the economy will get refucked. The number one mistake is thinking that fighting the virus and supporting the economy are mutually opposed aims. They aren't. Crush the virus and you can have a thriving economy back. Surrender to the virus and you also surrender your economy. Because when your hospitals overflow and your doctors are all dying and there are bodies in the street, there will not be a functioning economy. Reopening now, before adequate testing and tracing is available, and while case loads are still rising, is an act of surrender.
The consequences are not going to flow immediately. Things are going to feel just fine through the next couple of months of summer. It will be warm out. People will say that the warm weather killed the virus. Everyone will be outdoors, drinking beer and having a nice time. Food and bev will start to do a roaring trade again. People will think we are winning. There will be cluster outbreaks which will be blamed on poor management by the Governors. Some regional hospitals will be overwhelmed, but they will be a long way away.
But come late summer or early fall, shit is going to start to become visibly bad. We know the second wave of the Spanish Flu killed far more than the first wave. 195,000 Americans died of the Spanish Flu in the month of October 1918. There are 328 million people in the US. The Lancet estimates the Case Fatality Rate of coronavirus at 1.38%. Australia's actual Case Fatality Rate is 1.33%, which is one of the lowest CFRs in the world, reflecting a world class health care which is not under stress and massive testing, increasing the size of the denominator. If half of the US population catches coronavirus, and the CFR is optimistically 1.33%, then that is 4.3 million deaths across America. If the hospitals collapse, the death toll has the potential to get much higher.
I think the reality is we will not get there, and there will be a series of smaller state level, or town level lockdowns. This rolling wave of small lockdowns will fuck the economy good and will spark open conflict between the White House and State / local government.
What does this mean for Bitcoin? I believe that Bitcoin is still predominantly driven by US retail demand. I also believe that there is at least a 50/50 chance that the US economy will be fucked good between now and November. The confounding factor is that the halvening will reduce supply by 50%. Normally I would regard this as a sure thing, but it needs to be balanced against a possibly very sick US economy. Further complicating matters, just about every other developed country in the world has managed to figure out how to beat the virus and will be back on the path to recovery behind locked borders. People in those countries will be able to buy Bitcoin.
My conclusion is that we should not expect an ATH this year, and there is a 50% chance that we will not see the AYH again of $10,501 set in February 2020. Volatility will likely stay very high, which means the opportunity to profit from extreme swings and also opportunity to be liquidated if you are using anything other than very low leverage (less than 1x leverage). So be defensive and don't hold open long positions past the halvening.
Good luck and stay safe.
I agree with almost all of that. The only thing I would say is wrong is what happens when the economy gets refucked. The end game for the current financial system should have been a decade away at least, but once the cascading defaults begin, there will be two options. Massive deflation, on a scale never before seen as the debt unwinds through default, or massive inflation as all the debt is printed to oblivion to avoid the deflation scenario. The people making the decisions know they are going to have to destroy both the dollar and the current monetary system. They all wish they could have kicked the can a little bit further so it was the next person who had to deal with it. But COVID has bought the whole clusterfuck to a head. Bitcoin will soar against a dollar that destroys itself, because it must be destroyed. The deflation scenario will be too terrifying for those in charge to contemplate. They will see their heads on spikes. Things are going to get very weird I think, it will probably be good for bitcoin, but it will be really fucked up in so many other ways we may not care as much as we think we will.
