Is This Crypto’s Big Moment? Or Big Breakdown?

Another crossroads for Bitcoin during a year of hype and hope… [Morning Reckoning] July 09, 2024 [WEBSITE]( | [UNSUBSCRIBE]( Is This Crypto’s Big Moment? Or Big Breakdown? Baltimore, Maryland July 09, 2024 [Greg Guenthner] GREG GUENTHNER Good Morning Reader, Instead of a sizzling summer rally, crypto once again finds itself at a crossroads. The year began with hope and excitement. Bitcoin had just led stocks off their lows during the fourth-quarter melt-up rally, gaining more than 60% off its October lows. Crypto bulls were giddy as two big developments appeared on the horizon: the impending Bitcoin ETF approvals – courtesy of the Securities and Exchange Commission – and the halving. Both were seen as potentially transformational events that had the potential to spark the next leg of an already red-hot rally, finally pushing Bitcoin over the hump on the road to $100,000. But, of course, it all didn’t play out as smoothly as everyone thought. For a while, the bulls enjoyed near-perfect trading conditions. The stars aligned for Bitcoin during the first quarter as the ETFs earned approvals in January. Following a quick reset, Bitcoin launched higher, rallying 70% by March, and nearly 160% over the trailing 12 months. Bitcoin finally posted a new high in March after eclipsing $73,000, its first all-time high following the ugly “crypto winter” bear market that began in early 2022. Perhaps even more impressive was the fact that Bitcoin managed to gain more than 350% off its bear market lows. And with the halving in sight, bullish predictions got even bolder. Just how high could crypto rise by the end of the year? Was $150,000 a ridiculous target? What about $175,000? [Send Me Your Mailing Address!]( [Click here to learn more]( What I’m holding in my hands is the “most dangerous book” in America right now. It paints a grim picture of our country’s future just a few years from now…in 2029. But I’m offering to send you a copy for free today as a way to help prepare you for what could happen next. [Click here now to see how to claim your copy.]( [LEARN MORE]( Unfortunately, this is exactly when Bitcoin started to run out of steam. Nearly four months have passed since those all-time highs printed. Since this high water mark, Bitcoin’s pops and drops have been confined to a wide trading range of roughly between $57K - $72K. The halving came and went in late April, but it failed to spark a major rally right away. Bitcoin did manage to kickstart a fresh leg higher in May, yet it did not extend beyond $70K not once, but twice over the next six weeks. Since the early June retest, Bitcoin endured a slow retreat back to the bottom of its wide trading range. One failed bounce at $60K was all the bears needed to trigger a quick breakdown. This leaves Bitcoin in an uncomfortable position as it teeters in no-man’s land, a cool 25% off those all-time highs set back in March. More importantly, Bitcoin has lost a critical support level as it falls to prices not seen since February. As the crypto-HODLers lick their wounds, we should take a moment to discuss what the price action is revealing – and try to make some educated guesses as to what the next few weeks and months have in store for Bitcoin. First, it’s important to recognize that $60K was a big, obvious level for Bitcoin. We need to respect the breakdown and give the bears the benefit of the doubt until the situation improves. Not only was $60K a clear, horizontal support level – it also happens to be where we’ll find Bitcoin’s rising 200-day moving average (not pictured). While I don’t use moving average breaks as sell signals, it’s worth noting that the last time Bitcoin broke below a rising200-day moving average was August 2023. It took two months of sideways action before it reclaimed those levels. This was also part of a bigger consolidation pattern for Bitcoin – one that took nearly seven months to play out. A best-case scenario for the bulls that doesn’t involve an immediate recovery would be a similar sideways consolidation to what we witnessed last year. The sideways trend in 2023 had its fair share of rallies and dips, yet never got to a point that would have warned of a bigger breakdown (Bitcoin never fell back below $25K following the March rally). Taking a more bearish view, I could also see Bitcoin tumbling back to the $43K-$44K range, which was an area that acted as resistance back in December - January. If this scenario were to play out, I suspect we would have to endure a longer drawdown period before expecting crypto to reset for its next bull run. Another point for the bears is the complete failure of the halving to generate any sustained positive momentum. We’ve discussed the halving track record before since the past 3 halving events have led to a massive run-up in price. Yes, this is a ridiculously small sample size. But I did like our chances to at least see some positive follow-through following the event in April. Instead, all we got was more chop. As for how to react right now, I think it’s important to note that while shorter-term trends have turned bearish, I doubt crypto is completely broken. Instead, it probably just needs time to regroup. Whether this takes three weeks, three months, or longer remains to be seen. This isn’t a dip I’m rushing to buy. Not yet! Crypto is like any other over-hyped asset. No one wanted to buy Bitcoin as it languished below $20K for three months in late 2022. But everyone wanted in on the action as it roared back above $60K earlier this year. Now, these bulls that were late to the party are going to have to try to wait out this corrective action. We’ll soon see just how resilient these speculators can be… Best, [Greg Guenthner] Greg Guenthner Contributing Editor, Morning Reckoning feedback@dailyreckoning.com [Ex-CIA Insider: “Prepare for Election Meltdown”]( [Click here to learn more]( After correctly predicting the Great Recession of 2008, Trump’s 2016 Election and the Covid Crisis of 2020… Former advisor to the CIA, the Pentagon and the White House Jim Rickards… Is now warning everyday patriots like you to prepare for a historic election meltdown. [Click here to learn the five steps you need to take because things are about to get ugly](. [LEARN MORE]( In Case You Missed It… The Byzantine Blueprint: A Guide for America’s Monetary Revival Sean Ring, Editor [Sean Ring] SEAN RING Dear Reader, The doom and gloom surrounding the Presidential race is both undeniable and justified. America seems tapped out. It’s out of money. It has lost the moral high ground. It resorts to coercion to keep its allies – or rather, vassal states – in line. And it prints money to cover its lies. There’s a reason the Founding Fathers wrote hard money into the Constitution. Article 1, Section 10 of the Constitution reads as follows: No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility. The Fathers knew that the new government wouldn’t succeed for very long with elastic fiat paper money. Heck, “not worth a Continental” became a saying soon after the Continental Congress began issuing Continental notes. From [AIER]( In 1775, practically at the outset of hostilities, the Continental Congress authorized an issue of $2 million in paper money. By the end of 1776, $25 million was in circulation, already at a 30 percent discount relative to silver. By the end of 1777, $38 million was in circulation, at a 70 percent discount relative to silver. By the end of 1779, $192 million was in circulation, and $1 in paper money was worth only 1 or 2¢ in silver. The states were issuing their own paper money, contributing to the inflation. So, from our own history, we know elastic currencies all go to their intrinsic value: zero. And we even know how to get out of the mess: by making gold and silver legal tender. But in these dark times, it’s worth learning how another empire bought itself another 700 years. We don’t concentrate too much on that empire in our history classes, much to our detriment. The Byzantine Empire has much to teach us, particularly about how to get out of an elastic currency hole. The Byzantine Empire offers a critical case study of the effective restoration of economic stability through monetary reform. As the United States grapples with the consequences of its long experiment with elastic money, it’s worth examining how the Byzantines saved themselves from similar turmoil. This historical blueprint could provide a roadmap for America to reclaim financial integrity and stability. But first, let’s review why elastic fiat paper money is a bad thing. Problems with Elastic Money One of the most significant risks of elastic money is inflation. As the money supply increases, the value of money decreases, leading to higher prices for goods and services. We still haven’t recovered from Bidenflation in 2022 and may never do so. With no tangible value backing it, fiat currency is susceptible to devaluation. This devaluation erodes savings and diminishes purchasing power. The dollar has lost 97% of its purchasing power since the Federal Reserve came into being in 1913. The ability to print money can lead to fiscal irresponsibility. Governments may finance deficits and debt through money creation rather than sound economic policies, leading to long-term economic instability. You’re living through a case study in fiscal dominance, which is when a legislature handcuffs a central bank from doing its rightful job of raising rates and forces the bank to buy the government’s debt. Now, let’s go back in time to see how the Byzantines made a mistake and corrected it. The Byzantine Example: From Crisis to Stability A Brief History of Byzantine Currency The Byzantine Empire, which arose from the Eastern Roman Empire, initially continued the Roman tradition of solid gold coinage with the solidus. However, by the 7th century, the empire faced severe economic pressures: invasions, plagues, and internal strife. These challenges led to the debasement of their currency. The once-reliable gold solidus became increasingly adulterated with lesser metals, undermining trust in the currency and destabilizing the economy. By the 10th century, the Byzantines had realized the perils of a debased currency and initiated a series of reforms. Under the leadership of emperors like Constantine VII, the gold content of the nomisma (the Greek term for the solidus) was restored to its former purity. This move re-established the currency’s integrity, stabilized the economy, and restored trust both domestically and internationally. The Byzantine Reforms The Byzantines recommitted to a high gold content in their primary coinage, re-establishing the nomisma as a coin of significant value and reliability. Byzantine rulers enforced strict controls to maintain the gold content, preventing future debasement. With a stable and trustworthy currency, the Byzantine economy flourished. Trade expanded, and economic confidence was restored, leading to several centuries of relative prosperity. The answer is quite simple, but not easy. Get America back on the gold standard and stop printing its way out of trouble. Money has to be reliable and trustworthy. The American Experiment with Elastic Money The United States’ monetary policy has undergone significant transformations, especially since the abandonment of the gold standard with the Nixon Shock in 1971. This shift marked the beginning of the elastic money era, characterized by the Federal Reserve’s ability to expand and contract the money supply at will. While this system offers flexibility in responding to economic crises, it also presents risks, including inflation, currency devaluation, and loss of fiscal discipline. We’ve experienced all these things in the past few years. Learning from the Byzantines: Steps for U.S. Monetary Reform First Step: Reestablish a Hard Money Standard The first step for the United States is to reestablish a hard money standard, akin to the Byzantine return to the gold nomisma. This could be done in one of two ways. Pegging the U.S. dollar to a fixed quantity of gold would limit the Federal Reserve’s ability to print money indiscriminately. This move would stabilize the currency and restore confidence domestically and internationally. If returning to the gold standard is politically or practically unfeasible, the U.S. could introduce a new gold-backed currency alongside the existing dollar. This dual system would allow market forces to determine the preferred medium of exchange. Second Step: Implementing Strict Monetary Controls Just as the Byzantines enforced strict controls to maintain the gold content of their coinage, the U.S. would need robust mechanisms to uphold the integrity of its hard money standard. The U.S. must establish an independent monetary authority to oversee the implementation and maintenance of the hard money standard. This body should operate free from political influence to ensure objective decision-making. Finally, listen to Ron Paul’s excellent advice: conducting regular audits and transparent reporting on gold reserves and monetary policy would foster trust and accountability. Third Step: Fiscal Discipline and Economic Policy Monetary reform must be accompanied by sound fiscal policies to ensure long-term economic stability. The U.S. must reduce fiscal deficits through prudent spending and efficient tax policies. This move would complement the hard money standard by reducing the need for debt financing through money creation. It must also create tax incentives for savings and investment that would support economic growth and stability. A stable currency would naturally encourage these behaviors by preserving the value of savings. Fourth Step: Restoring Confidence and Encouraging Trade Hopefully, this step takes care of itself. A stable, gold-backed currency would restore confidence in the U.S. dollar, encouraging domestic and international trade. With a trustworthy currency, consumers and businesses would be more likely to engage in long-term planning and investment, driving economic growth. A gold-backed dollar would be attractive in international markets, potentially becoming the preferred currency for global trade. This move would enhance the U.S. position in the global economy and increase demand for the dollar. Wrap Up The Byzantine Empire’s return to hard money offers valuable lessons for the United States. By restoring the integrity of their currency, the Byzantines stabilized their economy and laid the foundation for centuries of prosperity. The U.S. can replicate this success by committing to a hard money standard and implementing complementary fiscal and economic policies. The United States stands at a crossroads. The experiment with elastic money has yielded the current undesirable state, and the risks of continuing on this path are becoming increasingly evident. By learning from the Byzantine Empire and returning to a hard money standard, the U.S. can restore economic stability, control inflation, and foster long-term prosperity. The path forward requires courage and discipline, but the rewards are substantial. A stable, trustworthy currency would benefit all Americans, preserving the value of their hard-earned money and fostering a more robust and resilient economy. The Byzantine blueprint is a proven model, and it’s time for the United States to embrace it. By adopting these reforms, the U.S. can overcome the economic challenges posed by elastic money and secure a stable and prosperous future for posterity. And that’s something to celebrate. Have a wonderful 4th! All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com X (formerly Twitter): [@seaniechaos]( Thank you for reading The Morning Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Greg Guenthner] [Greg Guenthner, CMT,]( is chief strategist at Forge Research Group. He has spent the better part of the past two decades developing long-term and short-term strategies with a single goal in mind: to help everyday investors generate outstanding returns and control their financial futures. Greg’s charts, analysis, and insights have appeared in Marketwatch, Forbes, Yahoo Finance, and many other financial publications. [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2024 Paradigm Press, LLC. 1001 Cathedral Street, Baltimore, MD 21201. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. 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