Cryptocoin Value and Market Trend Discussion

[dragontamer5788]

Nice; thanks. The other implied question was, what's the cause-effect relationship between that and QE?

What's the cause-effect relationship between a hammer and a screwdriver?

Answer: there is none. They're two different tools that do a similar job, but the Fed decides that sometimes it wants a hammer, other times it wants a screwdriver. Or... sometimes it wants to lower interest rates, other times it wants a reverse repo, and still other times it wants QE.

 

[80-watt Hamster]

What's the cause-effect relationship between a hammer and a screwdriver?

Answer: there is none. They're two different tools that do a similar job, but the Fed decides that sometimes it wants a hammer, other times it wants a screwdriver. Or... sometimes it wants to lower interest rates, other times it wants a reverse repo, and still other times it wants QE.

Ok, so some of the funds for the stimulus bills were raised via QE? And now they're running the reverse repo to draw some of all that injected cash back out to hedge against inflation?

The astute among you may have grasped that I'm not great at macroeconomics.

 

[dragontamer5788]

Ok, so some of the funds for the stimulus bills were raised via QE? And now they're running the reverse repo to draw some of all that injected cash back out to hedge against inflation?

Different organizations.

The Fed is the primary bank of the United States. As the largest bank of the country, they have a huge amount of influence over its member banks (literally everyone else), since the laws were written such that all other banks are members of the Fed.

Congress wrote the stimulus bill. The Treasury pays the bill. The Treasury creates these funds by (mostly) borrowing money. This borrowed money is called a "Bond".

The Fed has a relationship with the Treasury, but they're completely different entities. In fact, the member banks all have a seat on the Fed's board (with the US President appointing the chairman). So the Fed is in fact partially a free market entity, while also partially a government entity. Its one of those things that don't quite fit into "Free market" vs "Government". In contrast, the Treasury is 100% Government. Their goal is to sell enough bonds (aka: borrow enough money) to run the government.

The Treasury can also print money, if it so chooses. The US Mint (who makes coins) is for some reason... a different organization. Just to keep things confusing I guess? The Fed cannot print money, it must go to the Treasury if it wants to "print money". The Fed however holds the accounts of all of its member banks in the so called "Fed Balance Sheet", which acts a heck of a lot like money. QE is the expansion of the Fed's balance sheet.

----------

EDIT: I realize that's very confusing. So I always like following up the explanation with "Credit Cards", since I assume you're familiar with them?

A bank gives you a Credit Card with up to a $5000 credit line. It is illegal for a bank to "print money", so where did the $5000 come from? Answer: it came from no where, because you haven't spent the $5000 yet. Its just a promise, from the bank to you, that if you were to spend up to $5000, the bank is trusted enough in the greater economy that it will find that $5000 and pay off whatever you want when you swipe that card.

Similarly: when the Fed's balance sheet increases, its very similar to this "Virtual $5000" that is your credit card line. Its not really cash (because only the Treasury can make true cash). Its just a promise that the Fed can get the money if the member banks need it. In practice, this "Virtual $5000" ends up acting a lot like cash.

QE is kinda-sorta like the Fed expanding its credit-line on this credit card. If the Fed suddenly expanded its credit line to $20,000, it didn't "print" $15,000 out of nothingness. But the economy kinda-sorta acts as if $15,000 came out of no where. The Fed then used this recently expanded credit line to buy a bunch of things (in particular: bonds) to push the price of bonds up in the public markets (aka: to make interest rates lower).

 

[64K]

Unemployment is down to 5.5% but we don't know how many of those jobs are part time. A family member lost her job do to downsizing and she must have gone to a dozen businesses looking for work but everyone just wanted part time help. You can't even buy the basic necessities and pay the mortgage with a part time job. We could be looking at deflation around the corner because people don't have enough money to buy much. Inflation is a more likely scenario though.

The borrowing is out of hand though. Most of us know that we can't keep borrowing just to pay down our debt. The Fed Balance Sheet is almost 8 trillion dollars. That's kind of scary.

 

[dragontamer5788]

Unemployment is down to 5.5% but we don't know how many of those jobs are part time.

Isn't that just U-6 minus U-5?

U-1 Persons unemployed 15 weeks or longer, as a percent of the civilian labor force

U-2 Job losers and persons who completed temporary jobs, as a percent of the civilian labor force

U-3 Total unemployed, as a percent of the civilian labor force (official unemployment rate)

U-4 Total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers

U-5 Total unemployed, plus discouraged workers, plus all other persons marginally attached to the labor force, as a percent of the civilian labor force plus all persons marginally attached to the labor force

U-6 Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force

-------------

We track U-3 because that's the number that's been tracked the longest. If you have issues with the "definition" of Unemployment, you can track the alternative measurements (U1, U2, U4, U5, and U6) depending on how many people you want to include. U1 is the smallest group, and U6 is the biggest group.

 

[ZenZimZaliben]

Taking money out of the system doesn't work because we run on a system of debt and promises to repay. As soon as that fresh $1 bill is printed it is instantly leveraged, oh lets say 1000 times by the banks, so even by removing the actual $1 from the market it doesn't do anything for actual inflation because the debt of the banks that leveraged it 1000x is still in play.

The best way to stop it is to stop printing money, because then nothing can be leveraged.

 

[trog100]

the fed has two choices.. stop printing and watch the economy quickly collapse along with societal unrest or keep printing and watch inflation destroy things a little slower..

it will take the second option because its initially easier..

trog

 

[RandallFlagg]

Nice; thanks. The other implied question was, what's the cause-effect relationship between that and QE?

I'm asking you rather than Google because you seem to have a pretty good handle on this stuff, and are better at explaining it in plain language than most.

(If this is getting too off topic, please ignore.)

I'll give a little bit simpler explanation from my viewpoint.

QE means the Fed does open market operations and buys treasuries and MBS or bundled mortgages. If you have an IRA for example, and go look at fixed income assets that you can purchase, you'll see things like US Treasuries for sale by 3d parties.

Treasuries are like any other asset, they are worth what people will pay for them. With the Fed buying, they're worth more than would be 'natural' right now.

Lets step back, in 2019 I paid $50,000 for some treasuries and they yield 2.125%. In that 2 years, that's about 4.25%. But I can sell them now and get 6.14% return, i.e. a bit over $53,000. This is real, I actually own these and that is what they are worth right now. That is a 3.1% return from treasuries that would otherwise have a yield of 2.125%. The extra is because, if you were to buy a brand new 5 year treasury, it would yield around 0.88%. I get paid the difference in the yield by the buyer.

So a lot of investors will sell. The Fed has driven up the price of the treasuries such that it's not worth waiting another 5 years to maturity to get another $3000 when I can get half of it right here right now. Now I have $53,000 sitting in my IRA. I then re-invest it in stocks and so on.

However the above takes time. It's slow.

What if you want to suck money out right away?

Well, you tell the banks and funds that if they buy your assets and deposit money, you'll repay them for those assets in the future for a given % above their value.

Back in April 2020 the Fed dropped Repo rates to zero. This basically told the banks, you won't get any return from repos with the Fed, put your money to work elsewhere. This made sure that money out in circulation kept circulating, the banks and MMFs had to do something else with their money.

I keep using the word bank. The Fed has other ways to stop money flow from member banks. Reverse Repos are more for things they don't directly control, like Money Market Funds Hedge funds and corporate investment funds.

This was the very first move to loosen money supply in 2020, it's the first move to tighten now.

Reflected here, they went from ~200B to over 750B in about 6 weeks. This cash got sucked right out of the economy.

Now I don't know for a fact, but common sense would indicate, this is a direct result of the surprise inflation numbers.

It may also be the real reason for turbulence in the markets.

What this tells me, is when inflation went up the Fed was like :

Now they didn't want to panic anyone. They're still doing QE. But that reverse repo operation? WTF. That's 7 years of repos up on that chart. Someone at the Fed shit a brick.

the fed has two choices.. stop printing and watch the economy quickly collapse along with societal unrest or keep printing and watch inflation destroy things a little slower..

it will take the second option because its initially easier..

trog

These are bankers and politicians, not the salvation army. They're going to care more about the currency than your job.

Collapsing the currency would ultimately result in the same problem anyway, so why would they do it?

 

[trog100]

I'll give a little bit simpler explanation from my viewpoint.

QE means the Fed does open market operations and buys treasuries and MBS or bundled mortgages. If you have an IRA for example, and go look at fixed income assets that you can purchase, you'll see things like US Treasuries for sale by 3d parties.

Treasuries are like any other asset, they are worth what people will pay for them. With the Fed buying, they're worth more than would be 'natural' right now.

Lets step back, in 2019 I paid $50,000 for some treasuries and they yield 2.125%. In that 2 years, that's about 4.25%. But I can sell them now and get 6.14% return, i.e. a bit over $53,000. This is real, I actually own these and that is what they are worth right now. That is a 3.1% return from treasuries that would otherwise have a yield of 2.125%. The extra is because, if you were to buy a brand new 5 year treasury, it would yield around 0.88%. I get paid the difference in the yield by the buyer.

So a lot of investors will sell. The Fed has driven up the price of the treasuries such that it's not worth waiting another 5 years to maturity to get another $3000 when I can get half of it right here right now. Now I have $53,000 sitting in my IRA. I then re-invest it in stocks and so on.

However the above takes time. It's slow.

What if you want to suck money out right away?

Well, you tell the banks and funds that if they buy your assets and deposit money, you'll repay them for those assets in the future for a given % above their value.

Back in April 2020 the Fed dropped Repo rates to zero. This basically told the banks, you won't get any return from repos with the Fed, put your money to work elsewhere. This made sure that money out in circulation kept circulating, the banks and MMFs had to do something else with their money.

I keep using the word bank. The Fed has other ways to stop money flow from member banks. Reverse Repos are more for things they don't directly control, like Money Market Funds Hedge funds and corporate investment funds.

This was the very first move to loosen money supply in 2020, it's the first move to tighten now.

Reflected here, they went from ~200B to over 750B in about 6 weeks. This cash got sucked right out of the economy.

Now I don't know for a fact, but common sense would indicate, this is a direct result of the surprise inflation numbers.

It may also be the real reason for turbulence in the markets.

View attachment 205066

What this tells me, is when inflation went up the Fed was like :

View attachment 205067

Now they didn't want to panic anyone. They're still doing QE. But that reverse repo operation? WTF. That's 7 years of repos up on that chart. Someone at the Fed shit a brick.



These are bankers and politicians, not the salvation army. They're going to care more about the currency than your job.

Collapsing the currency would ultimately result in the same problem anyway, so why would they do it?

they basically have lost control.. what they have been doing works until it dosnt.. the time it dosnt is rapidly approaching..

having said that they have managed to keep it going for longer than i thought possible.. he he..

politics aside.. bitcoin and eth are showing a nice recovery from the last scary lows..

trog

 

[Nash]

bitcoin and eth are showing a nice recovery from the last scary

They said [nothing] it's now $34,132.62. Playing the same old song and doing the same old "trouble trouble" routine, rewind, repeat. Who cares, it's only play money.

 

[ZenZimZaliben]

Ehh I might be a little beyond "Play Money" at this point. But all this action on BTC is normal. It has tanked to a new ATH Floor and then moon'd many times.

 

[trog100]

Ehh I might be a little beyond "Play Money" at this point. But all this action on BTC is normal. It has tanked to a new ATH Floor and then moon'd many times.

my "play money" has gone down by about 35K since its peak in april but it aint money i need so i can live with that..

trog

 

[Nash]

Seven day sticks. The big wave pattern here goes down, until it goes up.
This is probably a different from 200yo blue-chip companies.

If you're not mining and you're not a billionaire, don't act like one with this, it's a firecracker!

 

[Liquid Cool]

I'm dealing with some health issues or I would have posted earlier....

BTC looks like a successful retest of 30k to me, but yes...that does appear to be a truncated fifth(more on this topic AND commodities later), so...no a-b-c here. I'd expect a nice bounce into the range we mentioned earlier and then it might be time to watch closely. Although with markets that are bubbly...expect exaggerated expansion. In my world hi's/low's don't matter...it's all in the pattern of time AND price. RF...I know you're familiar with that if you're mentioning fractals.

Since there are a lot of science types on this site who appreciate pi and as I briefly read through the thread I saw a recent comment or two on the US dollar...I will post one of my own charts. I post this with the comment that this formation can be found if you observe 11.09 in the SPX and start moving towards the Bethlehem Star(as the center and 3.04 as beginning of the last wave.). With technical analysis...may you never stop expanding your knowledge base.



I've always watched the dollar/gold relationship rather closely. If you look at the up volume vs. the volume on pullbacks on the base in uup...bullish.

Take care, will drop back in as soon as I can...

Liquid Cool

 

[trog100]

that chart looks fine to me nash.. the whales helped by general media fud have driven the price down as far as they can.. from now on in the only way is up..

trog

 

[Nash]

I'm dealing with some health issues or I would have posted earlier....

Take care of yourself first! We've had to deal with a lot in the last 18 months.

I marked up a year chart mainly to to point at Musk.
All together now, this 90 day bust was Elon's fault.

 

[lexluthermiester]

Looks like the crash is real. BTC below $30k and Eth below $18k. Still waiting for a buy point...

You'll be waiting a while. The crash will keep going. Cryptocoin values are likely to return to pre2021 levels but it will take a few months to get there. On the up-side GPU prices are falling(YAAY!!).

 

[ZenZimZaliben]

Now or Never. The crash will not keep going. Cryptocoin values are likely to return to THE MOON but it will take a few months to get there. On the down-side GPU prices are DOOMED(Meh!!).

 

[lexluthermiester]

The crash will not keep going.

That's what many said last month and it's still going...

Cryptocoin values are likely to return to THE MOON but it will take a few months to get there.

And the farmer dragged off yet another load...

On the down-side GPU prices are DOOMED(Meh!!).

Ah, you're deliberately being contrary...

 

[ZenZimZaliben]

Lol, yah. That's my tag - I'm contrarian. And that no one really knows.

 

[Mescalamba]

It might crash, but compared to previous ATH its taking really long and moving really slow.

But ofc even way up took much longer. Wasnt bull run, more like bull climb.

 

[lexluthermiester]

It might crash, but compared to previous ATH its taking really long and moving really slow.

But ofc even way up took much longer. Wasnt bull run, more like bull climb.

Yeah, it's been interesting to watch. Some people have said that it mimicking the stock market, but I just haven't seen that and the frequent charts by RandallFlagg & Nash illustrate this very clearly.

 

[RandallFlagg]

I'm dealing with some health issues or I would have posted earlier....

BTC looks like a successful retest of 30k to me, but yes...that does appear to be a truncated fifth(more on this topic AND commodities later), so...no a-b-c here. I'd expect a nice bounce into the range we mentioned earlier and then it might be time to watch closely. Although with markets that are bubbly...expect exaggerated expansion. In my world hi's/low's don't matter...it's all in the pattern of time AND price. RF...I know you're familiar with that if you're mentioning fractals.

Since there are a lot of science types on this site who appreciate pi and as I briefly read through the thread I saw a recent comment or two on the US dollar...I will post one of my own charts. I post this with the comment that this formation can be found if you observe 11.09 in the SPX and start moving towards the Bethlehem Star(as the center and 3.04 as beginning of the last wave.). With technical analysis...may you never stop expanding your knowledge base.

View attachment 205142

I've always watched the dollar/gold relationship rather closely. If you look at the up volume vs. the volume on pullbacks on the base in uup...bullish.

Take care, will drop back in as soon as I can...

Liquid Cool

Actually there's no truncation on the 5th wave, it made a new low. Truncation would be failing to go below the 3rd wave.

I also think BTC has more push down before a big rally. I can't be sure, I count 5 waves down recently as a wave 5, but it is possible that is a 1 of 5. It is also proportionally messy. 5=1 would make more sense. That would put BTC back to 20-25K.

Also the pattern on BTC, when it peaked. That's called an ending diagonal. Ending diagonals are strange because they they are counted 1-2-3-4-5, but all 5 waves subdivide into 3's. More info in that link.

I posted earlier, the NASDAQ seems to have the same pattern, but didn't appear complete although close.

Well, it now looks complete.

Ending diagonal :

Here's BTC when it topped note the last 4 waves clearly subdivide into 3's - one could debate the 1st wave, but we know the results here already :

Now here's the NASDAQ. Same thing, a few months later? Hmmm..

 

[Space Lynx]

I expect BTC will skyrocket if Congress doesn't listen to Yellen and have something done by end of August. I hate crypto as you all well know. However, USA can't just print 6 trillion in less than a year and have no consequences either (still blows my mind... and at end of day it didn't even really change anything... the vaccines were actually very tiny amount of that money), keep in mind as inflation skyrockets older people and disabled people on fixed incomes will hurt even more, they will spend less, and the ripple effects are so fragile that everything can come crashing down very fast.

Treasury Secretary Janet Yellen warns of 'absolutely catastrophic' hit to economic recovery this summer if US can't pay its bills on time

If the federal government can't pay back its debtors in time by raising the debt ceiling, it could put Americans' jobs and savings in jeopardy

www.businessinsider.com

Without the extension, she warned of an "absolutely catastrophic" default that would imperil the nation's economic recovery from the pandemic.

"I think defaulting on the national debt should be regarded as unthinkable," she told the Senate Appropriations Committee, calling it "utterly unprecedented in American history for the US government to default on its legal obligations."

Though borrowing is a routine cycle the federal government uses to keep the country running through the sale of bonds, it's reaching its "debt ceiling" on July 31 and needs to service its debt before it can borrow more.

Looks like just raising the debt ceiling and relying on bonds simply won't cut it this time, got to start paying the bills eventually. I think September of this year we could be looking at $8 loaf of bread, $11 gallon of milk, across the board, unless Congress gets its act together and cuts spending and increases taxes on wealthy, and the taxes can't go to anything new, they must go to paying down the debt. We'll have to wait and see. I'm not very hopeful though, they will have in-fighting and bickering like they always do. Yellen says she has enough emergency power to pay the debts until end of August. So I will revise my statement, by end of December not September, if Congress has not corrected their horrible endless printing spending habits, it will all come crashing down.

That being said, Yellen is well aware of it, which is why she specifically says have to pay the debt some, can't just raise debt ceiling this time... those are the words heard round the world... it's been 20 years of just raising the debt ceiling... something tells me those rich people got PassPorts and other bank accounts in many other countries for a reason, maybe that day is finally coming. I hope not. Let's hope Congress gets its act together and realizes their isn't an endless amount of money they can just print.

Honestly I see a way to do it, but no one would ever agree on it. This is only part of it, but I'd even include a 1% tax on every single person's paycheck in America regardless of income level or disability check, or social security check, and the pay stubs on every single one will read "1% taxes deducted to bring down the national debt, be careful who you vote for, and how they spend your money, vote more smart in the future" (this is not a political statement, as both sides spend insanely on various useless things). We evolve as a society, or we fall... my guess is we will fall. The sad part is, we could have had everything we all wanted, on both sides, but cause of so much hate and fear we just say screw everyone and let the machine crumble. Very sad indeed.

@RandallFlagg thoughts on Yellen here? America already had one credit rating deduction can it withstand another? Congress has to not delay, and come to a sensible net positive balance sheet before it is to late.

I know Jack Dorsey, CEO of Twitter, has a lot of crypto... all the richest of the rich do... alongside their many passports and other currencies, they wouldn't do that if they thought an American permanent crash wasn't possible... hmm. Thoughts? My only conclusion is that if Congress doesn't get its act together by end of December its all over as far as inflation goes, and the final crumbling of the middle class.

I think we are at a breaking point right now. If Congress fails at a bi-partisan level, and they don't find a way to work out a paying down of the debt and inflation doubles again with compounding interest to boot, crypto soars to the moon in 2022. If Congress surprises us all of us, and acts like mature human beings who put on their utilitarian hats instead of their toddlers at recess hats, then crypto falls and busts in 2022. This is my thinking anyway, time will tell.

 

[trog100]

on a three year chart bitcoin is up around 450% eth around 300%...

nobody will ever lose money if they simply buy and hold.. am i wrong.. ??

trog