Bitcoin breaks neckline of monstrous head-and-shoulders pattern

See the latest Australian dollar analysis here:

Macro Afternoon

Still suffering from the crash resulting from its now-notorious four-headed hydra pattern, Bitcoin joined another chartist’s nightmare yesterday, breaking the neckline of its monstrous head and shoulders top:

The drover’s dog can tell you that opens up big technical downside. Which is very likely voodoo but all the more apposite for being so.

As Hamish Douglass at Magellan says, BTC and crypto is the largest ever bubble, that history will view with hilarity:

“Cryptocurrencies, I have to say, are one of the greatest irrationalities I’ve seen in a very, very, long period of time because of the cult-like following it has behind it and the scale that is behind it,” Mr Douglass said.

“There are millions and millions of people participating. Some of the people, they’ve never invested before and the only bandwagon they’ve ever got on is the cryptocurrency bandwagon and it’s almost like a religion.”

There are many issues with crypto but the largest is there is nothing backing it. Stablecoins are nothing but voided shadow banks. CDOs with obscured risk and no collateral. BTC is a complete joke reliant entirely upon ignorance to function. That’s why the volatility is so extreme. Bank runs happen hourly!

But, there may be times when BTC does send a signal worth paying attention to. As it collapsed below $30k yesterday, we might have seen one of those times.

Why is this useful? Because it’s probably fair to say that BTC has arisen, in part, owing to the printing and profligacy of fiat currencies, especially the US dollar. So, when we see BTC plunge to new yearly lows, I see it as a signal that liquidity is withdrawing from markets, courtesy of Viktor Schvets:

Goodbye BTC. Watch out gold.

Houses and Holes


  1. I like Bitcoin. It keeps a lot of hot money out of asset classes that I like to invest in, making them cheaper to buy now, but not reducing their longer term value.

    When the USDT peg goes (Tether is the most obvious scam of the 21st Century), then the collapse of associated crypto-currencies (that are largely priced in USDT) will be epic.

    I welcome more broke and desperate gamblosers, because it will push down wages and therefore costs, thus making my morning Denver Omelette cheaper. BTCs zero-sum demise will supply a lot of those. Actually, it’s negative sum, because you have to extract the costs of paying for electricity and mining equipment.

    HODL to zero! 1 bitcoin is worth one bitcoin! Be your own bank! Have fun staying poor! Funds are SAFU. It’s comedy GODL! Ha ha ha!

    • “Some of the people, they’ve never invested before and the only bandwagon they’ve ever got on is the cryptocurrency bandwagon and it’s almost like a religion.”

      Actually, it is a religion.

      While few people are prepared to admit it, because both are based on faith (belief in the absence of evidence), there’s no difference between a cult and a religion.

      • C.M.BurnsMEMBER

        yep. the only meaningful difference between a cult and a religion is that one is recognised by the state; and the other is not. And when there is a historical relationship between the state and a particular religion, said religion generally also enjoys tax free status and all sorts of privelege owing to access-to-powers-that-be

  2. Spoken like a true no-coiner. Btfd. … No, just joking. Bitcoin was always just a test run for sbdc’s. Once you get your certificate of vax ID 19, you will get access to your UBI via your linked bank account. I think it should be called the Australia Card or something similar.

  3. I was working in the lab, late one night
    When my eyes beheld an eerie sight
    For my monster from his slab, began to rise
    And suddenly to my surprise

    He did the monster crash
    (The monster crash) It was a graveyard smash
    (He did the crash) It caught on in a flash
    (He did the crash) He did the monster crash

  4. Ronin8317MEMBER

    The amount of electricity used to ‘mine’ Bitcoin is plain stupid. It would be a harmless scam if not for that.

    When it falls enough, crypto exchanges will go bust followed by their operators become billionaires.

  5. Hi David, would like to get your thoughts on how much downside you expect with gold given the current conditions?

  6. definitely they’ll get it below the $21k high to route the stops below that. flash crash to $10k, optional dead cat bounce.

  7. Stewie Griffin

    BTC is a Bubble – but the BitCoin technology that it was originally based on is not a fraud.

    CBDS are coming, despite being a fraud Tether is the template for how they will be delivered and transported. CBDC will be carried on a blockchain and the blockchain that ends up carrying them will carry them all.

    There will only be one.

    • C.M.BurnsMEMBER

      good to hear from you Stewie. A succinct summary. My thinking is the same as yours.

    • Agree, the cryptographic verified publicly available ledger (blockchain) is the value, coins themselves should be priced proportional to the cost of their mining (validating the ledger). CBDC’s allow an execution speed of fiat policies not available to traditional bank networks. For it to work in an MMT sense every citizen/org/govt dept etc would need a Digital Currency Wallet.

      • Stewie Griffin

        “coins themselves should be priced proportional to the cost of their mining (validating the ledger).”

        Yup – crypto’s price should be determined by the economic interaction of the cost of mining versus the work performed i.e. use cases solved. There is no use case other than speculation in buying an asset purely for the purpose of seeking another buyer.

        Integrating digital wallets into existing banking apps would be a trivial exercise in terms of coding. There would be no need for a full spectrum of all crypto currencies to be made available, all the banking app user would see would be a single currency – the CBDC equivalent of the AUD.

        That said there would be nothing preventing a bank user from sending their CBDC to any private wallet capable of hosting them…. does anyone start to see the problem that CBDC present to existing banking balance sheets yet – especially in a zero bound interest rate environment?

          • Stewie Griffin

            Once digital identities become attached to wallet addresses from a KYC/ALM perspective (there is a Company called Kompany that is already doing that in the corporate space) there is nothing stopping you being able to send money to any bank or financial institution bidding for it. Add your filters maybe a couple credit rating or name barriers, set and forget your sell, go to dinner and then let the most needy financial institute commence bidding.

  8. 10 year real yields is a whisker from year lows. The 10 year bond yield could easily drop to 1.
    The last inflation print still came in red hot so breakevens not dropping fast enough.
    Gold (and silver) could go higher from here

  9. PolarBearMEMBER

    That is not the neckline breaking it is merely the wrist of the hand waving pattern breaking. It was a hand waving goodbye. Or a hand held above water that no longer has the energy to keep waving.

  10. Lol, TA is such a load of BS.
    How many of these premature Bitcoin obituaries have you penned over the years?

    What was the price of BTC last year? Look at it’s long term chart. It’s a volatile asset. Yet every downwards plunge is still met with, “well, that’s the end”. It’s comical.