The Bitcoin Quarter of Sideways: is the Bear Done?

It’s the last Friday of the month, and of the third quarter. That means futures have expired earlier today, but quite unusually bitcoin didn’t care.

Usually it falls on the expiry week, but while stocks dived, pound yoyo-ed, bonds crashed, bitcoin sort of said F U lot. Sources at the Bitcoin HQ say he’s off to Winchester having a pint until it all blows over. Raising the question: is the bear now too tired, and has he even maybe left?

Corporate media would have us believe that we’re in some sort of massive crisis with the economy already in a depression while people who had to choose between eating and heating now won’t have a home at all, and there’s a calamity everywhere, and everything is awful. Except left leaning outlets when it comes to Biden, in which case everything is awesome.

This intense exaggeration has made the public tune out a bit because humans are fortresses, as well as the most adaptable species that exists and maybe has ever existed.

We saw that live earlier this year when the initial panic of the people of Ukraine quickly gave way to: ‘yeah the sirens go off, but I don’t go to the bunkers anymore.’

The human spirit tends to quarantine negativity. The initial developments of course lead to quick reaction, but the new quickly becomes the old. We adapt.

Sometime we adapt so much that we forget or don’t bother to consider different ways. Inertia, a certain force that desires to conserve energy, makes the new not just old, but the only alternative.

This applies to Vladimir Putin, and his mobilization of the young to keep continuing this new old reality, as much as it applies to 15 years of central bankers and Keynesian economists initially telling us in 2008, and then not even bothering to say, that the temporary emergency measures were the way.

Shocked appears to be the British media that some think, after 15 years of stagnation, maybe it is not the way, or at least not anymore.

The markets however, after briefly showing who was swimming naked, appear to be giving a different verdict than the media.

In the process we’ve learned that grandpa’s pension funds are actually acting like crypto bro degens, using leverage as much as 7x in ‘hedging’ the chances the Bank of England lowers interest rates, and thus bond yields falls.

That means they shorted, with leverage, a rise in gilt yields. Just like plenty short bitcoin’s price, they did bond yields, as a ‘hedge.’

Those yields have been rising significantly this year. Thus some got margin called or were close to it. To avoid that, they needed to add more capital. To capital, they had to sell bonds for cash, increasing those yields further, and so sending their short even more underwater. A classic cascade.

Bonds apparently, the rich people’s money some say, were not in itself acceptable as capital, they had to be sold for fiat. So in defi we’re more advanced because we accept eth as capital for collateral as well as meme coins and anything that has a number to it.

Grandpas tho were degening in grandpa systems, to the point BlackRock allegedly removed the buy and sell button.

Bank of England moved in, and thus we get a semi-official declaration that there is a new, and this is in the process of becoming an ‘old.’

The New Economy

Until now, we’ve had good cause to be concerned. Central banks were moving without debate, without even a mention in ‘plebs’ media, even as they effectively announced their intentions were to crash the economy.

Investors therefore were being whipped, with no end in sight, and while seemingly having no voice as they were not being heard by the central bank.

The stated reason was inflation, due to rising energy prices, and of course the ineffectiveness of both Biden and European leaders in energy diplomacy could not be discussed, for Biden because America has more interests than just Europe, and for the European ones because they were trying, with Scholz in particular at least appearing to be very active.

A checkmate. Central banks had to do this, governments couldn’t do much, and so the economy gets a beating.

Until Liz Truss, who no one had heard of prior to a few weeks ago, stated in the first debate that she has a plan, and that plan sounded much like what we’ve suggested here and there in the many analysis of economic data throughout these pages.

Now that she is in charge, there is at the very least a debate. There is an argument on the economy. Tackling stagnation is top priority in the halls of power, not just these pages, and the elected are back in charge of policy, rather than central bankers.

There’s cause for optimism thus, at least in our view, where investors are concerned, because doom is no longer quite the only option, and the narrative of the past few months is heads on being tackled by the positive narrative of out with Keynes since he gave us stagnation.

Though not completely out. The Bank of England intervention showed to markets that bonds won’t get out of hand. There’s a backstop.

The ‘uncosted’ spending therefore is now probably less of a concern, something that may have led to markets looking again at the plan to see any positivities they may have overlooked.

That’s of course the likelihood of growth. The British GDP increased by 0.2% in Q2, significantly exceeding expectations of a contraction of 0.1%. The media has exaggerated.

That exaggeration has been answered however. The government will cover these energy costs, that should bring down inflation considerably, interest rates may rise a lot less than thought, and on the policy front or fiscal measures, the near extinct rare species of the entrepreneur is seemingly making an appearance alongside all those homeless people and food banks that apparently ravage Britain.

Politics is back, in short, economic politics. Thats after 15 years since the British public heard such technical terms like ‘supply side reforms.’

‘You talk about supply side reforms and all these technical terms in your ivory tower, but people are starving,’ said one anchor on the BBC, making it quite unclear who exactly was in the ivory tower.

That shows just how long it has been since economic theory was a matter of discussion, but now that it is, one might well get a feeling that we’re finally back to normal.

And business, entrepreneurs, the economy, growth; better, faster, stronger, that’s what normal looks and arguably the chief task of whoever is running the country.

The bear therefore, if it is not over, may well be nearing it, because although there are challenges, they are being addressed, and there is now an optimistic plan of action that… should succeed or at the very least may succeed.

Markets presumably have not quite priced-in that yet, but bitcoin sidewaying raises the prospect that there may be a change of trend, and thus the new quarter may well begin with a new perspective too and a new evaluation of where the economy is headed.