Market Lab Report / Dr. K's Crypto-Corner
by Dr. Chris Kacher
The Metaversal Evolution Will Not Be Centralized™
Correct conspiracy theories?
More conspiracy theorists have been getting it right these days. Theories about 3-lettered agencies running the show to the CIAs MK Ultra to the Gulf of Tonkin incident only scratches the surface. That said, one of the theories that is still up for debate is that the system is intentionally designed to oppress people by way of inflation that is built into the system. While it is true that central bank money printing creates inflation thus oppresses the majority financially especially post-Covid since the majority are now living paycheck-to-paycheck in the western world, this was not its objective. Rather, it is the long term consequence of selective political pressures to address short-term needs that gives such systems the momentum that eventually oppresses the majority and hampers long term growth. Regulatory capture, overbearing regulations, and favoritism are three such examples that add to this oppression and boost inflation.
Slower pace of cuts
November CPI accelerated to its hottest rate in five months at 2.7% year-over-year, but at the same time, economic growth remains robust. Fourth-quarter GDP is on track to come in at 3.1%.
The Fed's Dot Plot shows the pace of cuts will slow in 2025. The techcentric NASDAQ Composite and S&P 500 took hits on the news after being near new highs with FedWatch futures predicting only one more cut in 2025. The broader averages have been in downtrends. Bifurcated markets have been standard in this era of QE but will stubborn inflation and slower rate cuts hamper stocks? Powell's testimony indicated the economy and rate policy are both in good places. The slower pace of cuts reflects the higher inflation readings so far, but he sees the pace of cuts on track. He said it's a balance of risks on how fast they cut rates, to not cut so fast that inflation heats up, but not so slow that growth and the jobs market get hurt.
The dot plot shows 3.9% end of 2025 and 3.4% end of 2026. Powell said if inflation falls or unemployment rises, they can lower rates more quickly.
BTC ?x this bull cycle
Spurring bitcoin to new highs is the great inflation megatrend spurred by global liquidity. But before I delve deeper into that topic, three major supply shocks in bitcoin have happened since 2012. The first came in mid- to late 2012 when Marc Andreeson, Chamath, Fred Wilson, and the Winklevoss twins started buying bitcoin. This was shortly before I started buying in Jan-2013. The second great supply shock came in late 2020 when Michael Saylor started buying bitcoin in quantity. The third shock is now where Microstrategy (MSTR) vacuums up bitcoin followed by other companies and countries.
This potentially may make a significant difference in this bitcoin bull cycle. Projections of 150k to 250k bitcoin may fall well short of the mark despite the price of bitcoin compressing during each cycle.
Global Liquidity refers here to the flow of financial capital through World markets that can be used for asset purchase in the financial economy and investment, trade and consumption in the industrial economy. It also reflects the ease with which assets can be converted into cash. Global Liquidity comprises Central Bank interventions which includes credit provision by banks and shadow banks, and cross-border flows. Crossborder Capital estimates it totals around $175 trillion, or two-thirds bigger than World GDP. No wonder inflation continues to exponentially rise given the log-log plot above.
Crossborder Capital analyzed the data to confirm that liquidity has a 11-13 week lead time positive price impact on Bitcoin. The ‘earliest’ statistically significant impact on BTC$ comes after 5-weeks and the latest after 16-weeks.
As for those who have become concerned on the concentrated holdings of some BTC holders, they are confusing Decentralization of Ownership with Decentralization of Control. Bitcoin's decentralization primarily refers to the network's control and operation. The Bitcoin network is maintained by a distributed network of nodes and miners, where no single entity can control the entire network or alter the protocol without consensus. This aspect remains intact regardless of how much Bitcoin one individual or entity owns.
TSLA
Since we called the buyable gap-up in TSLA on November 6, TSLA has streaked higher.
The Trump victory is a major game changer. Some analysts estimate the AI and autonomous opportunity is worth at least $1 trillion alone for TSLA. Reuters reported Sunday the Trump administration will repeal a requirement for companies to report automated vehicle crash data. Musk had previously voiced his opposition to the rule, as he’s claimed regulators unfairly target TSLA on multiple fronts. Key initiatives will likely now get fast tracked for TSLA. Even in the event of China tariffs, the new administration will help shield TSLA from any fallout.
In consequence, some believe TSLA remains the most undervalued AI play in the market today. Some analysts estimate a market cap north of $2 trillion for TSLA by the end of 2025, which does not even account for further potential upside from Tesla's Optimus robots which at some point will be massive wherein many will own their own robots.