How I got Bitcoin wrong

Time to eat some hat

I have been rather vocal over the last few years on what my price target was for Bitcoin in December 2021. As some regular readers might remember, I had called for a price of $200k (yes, two hundred thousand Dollar) per Bitcoin. Clearly, I got that one wrong. It was a forecast made in 2018 and one that got rather close to being perfect, even though it was ultimately wrong. Let’s look at how I got Bitcoin wrong.

First off, here is an excerpt from an article I wrote and published in Finweek (note: this was an article published in 2019 as a follow-up to the 2018 article);

Published in Finweek – 23 July 2019
Published in Finweek – 23 July 2019

So that part I can comfortably say that I got right. The pullback to around $4k, the trading range, the eventual break out and run to new highs. Even the December 2021 top (for now). The ultimate price target however, was not correct. I had expected Bitcoin to tenfold the peak 2017 price of $20k as it would have been a percentage move only one-tenth the size of the previous cycle parabolic push. My reasoning was that in each cycle the size of the parabolic move would be one-tenth the size (in percentage terms) of the previous one. As it turns out, the 2021 push was not 1000% as I expected, but rather around 250% (to around $68k) from the previous all time high. Alright, still not a bad return, especially if you picked up at around $4k. But what went wrong?

I did not take into account that formal investment institutions would take such a big interest in Bitcoin (and other crytpo’s) as they did. Today there are a number of Bitcoin ETFs and ETNs, as well as a vibrant derivatives market. One could argue that this brings more interest, more buyers and thus higher prices, but in reality what is happening is that Bitcoin (and crypto in general, in a sense) is being formalised into the ‘traditional’ financial system. With that ‘formalisation’ comes proper hedging, more informed investors and sadly, less volatility. In the long-run this is probably a good thing as eventually it can (and will) be classed as an asset of sorts. As people learn to understand it, they can create regulations to govern it. You might be in the camp of ‘regulation bad, crypto = freedom from the system’, but let me assure you that not all regulation is bad. There is a good reason the FSCA beats the ‘verify the FSP’ drum so hard. Regulation, in many cases, is put in place to protect the public form unscrupulous characters using fancy new tech to screw swindle people. In my view, some regulation in this space will do well to formalise it as a real asset (and also allow me to include it in client portfolio’s). Once it is properly regulated and we have mechanisms in place to prevent fraudsters from swindling people, then the ‘real’ world will finally take it seriously.

But where to from here? Well, I think that we see the pattern repeat again and that we likely see some downside over the coming year. Currently my thinking is that Bitcoin can be treated much like a company specialising in payments (which is super trendy at the moment). Payment processors (outside of VISA and Master Card) are basically ‘tech’ companies… and I am not sure that ‘tech’ has a great year in store. I could be wrong and would be happy to eat my hat again, but I think that given the ever growing energy crisis, Bitcoin will come under severe media scrutiny and might even be shunned some. Only the true believers and hodlers will remain bulls. Those who are mad or crazy might wait for $20k to load up bucket loads, but the rest of the market will once again chase it in about three and a half years from now as its once again breaking the highs on the back of the mining reward halving cycle.

At least, that is my 2 Satoshi’s on the matter.

But you came here for the trade ideas

I won’t lie, it is nice to receive phone calls from people who read and trade the ideas that I’ve been posting here for the last two years. I should say that Herenya can be a lot more helpful if you clicked on the green ‘open account’ button at the top right… but hey, for those who called and asked from charts, here are a few 🙂

S&P 500 Volatility Index (VIX)

The VIX PUT trade suggested last week is nicely in the money. You could probably close it here, but there is another week to go before expiry. I guess you can choose between taking the easy money now, or giving it some time to print a little more. It’s up to you really, but the longer this trade is open, the more Theta you will pay.

US Dollar index (DXY)

Strong reversal to start the week, but overall the trend is up here. To me this looks like we might be in for rather a lot of DXY strength in the year to come, provided that the trend line holds. Let’s see how non-farm payrolls data is absorbed by the market. For now though, I would be looking to buy into weakness here. For the USDZAR traders, this would mean buying USD in the face of ZAR strength.

Sun International (SUI)

Austria, Australia and some others might be mandating vaccines and beating protecting its citizens who don’t wear masks, but the rest of the world is starting to get over it. Eventually we will travel again, and eventually our airports will be filled to the brim with tourists, probably like we’ve never seen before. That thesis, along with early signs of bullish momentum and a decent long setup makes SUI a compelling buy to me. I have put my stop under R23 and will just let this trade ride for a while.

Naspers (NPN)

Dare I say it? NPN could be a decent buy here. It is finally starting to look as if NPN has formed a base. The risk takers can go long here and either sell at the top of the range or add on a bullish break of the range. The patient traders can wait for the 200 day moving average and the range to be broken before buying.

Bitcoin (BTC)

Expanding on my thoughts above, I think it is most probable that we see BTC spend some time under the 126 week moving average and even retest the $20k level. It is totally possible that it just ranges for a while, or that my ambitious price target from years ago still is reached within the next 12 months. I suppose with BTC almost anything is possible… but to me, the most probable outcome, is another chance to buy lower down.

Capitec (CPI)

The stock that everyone has hated on (including me) just keeps trending higher and higher. It looks like is has retested the previous break out and is starting to show early signs of bullish momentum. I think CPI is a decent long here with a stop under R1950-ish. Follow the trend.

Dis-Chem Pharmacies (DCP)

It broke out a few weeks ago on the back of news about a medical aid scheme, but then the tantrum happened and it got smashed. It looks like it is giving a second chance for those who missed the bus the first time.

Joining HCA trading

HCA trading offers a number of different trading accounts to suit different types of traders. Our offshore trading accounts allow traders to buy shares, ETFs, CFDs and even fractional shares in the United States for only $2 a trade. Locally, we offer shares, ETFs and CFDs at good rates with robust and reliable trading platforms. All our trading, including CFDs, is done on a Direct Market Access basis and thus our clients are able to interact directly with the real equity market and not have to worry about excessive counterparty or liquidity risk. Our prime broker locally is a big four bank and offshore we make use of one of the largest non-bank prime brokers in the world.

Local stockbroking rates
Trading instrumentBrokerage rateMargin rateMinimum trade charge
JSE listed equities and ETFs0.30%100%R150
CFDs on JSE listed equities0.20%10% – 25%R50
SAFEX listed index futures (ALSI)R206% – 8%R20 per contract
Offshore stockbroking rates
Trading instrumentBrokerage rateMargin rateMinimum trade charge
U.S. listed equities and ETFsUSD 1 cents per share100%USD 2
Canada listed equities and ETFsCAD 2 cents per share100%CAD 2
U.K. listed equities and ETFsGBP 12 + 0.1%100%GBP 12
Germany listed equities and ETFs0.20%100%EUR 8
Forex0.40%100%USD 4
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*Please note that these trade ideas form part of a larger weekly plan and the value of financial products can increase as well as decrease over time, depending on the value of the underlying securities and market conditions. The risk of loss arising from trading in Contracts for Difference can be substantial. You should carefully consider whether such investments are suitable for you in the light of your circumstances and financial resources.

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