Bitcoin (BTC), Nasdaq 100 (QQQ), and VIX: Pricing in War?

May 23, 2019 / by Bill Noble

Blog posts are coming out today validating our idea from yesterday that legacy financial markets and banks may be headed for a “black swan” event. A black swan is market slang for a big negative event that comes out of nowhere.

Three pieces caught our eye this morning. One article briefly mentions that Chinese President Xi is ‘in more trouble than we think.’ The article highlights research from a major bank showing the U.S. economy is shifting its supply chain to get more goods from countries outside of China. This could cause GDP in China to shrink 1%-2%. The next article discusses whether or not the Chinese will use their holdings of U.S Treasuries as a weapon in the trade war.  Yet, another article shows that the Chinese currency is vulnerable.

To us, this news flow hints at a major up move in Bitcoin (BTC) unfolding alongside a major drop in U.S. stocks. Rhetoric of a massive escalation of the trade war between the U.S. and China could hit the tape soon. Given the situation, these events could lead to fear of a shooting war, which would be an obvious negative for equities and increasing demand for Bitcoin (BTC) as a safe haven.

Charts seem to validate these themes.

Technically, we are going to stick with a revised version of our Livermore framework on a Bitcoin (BTC) intraday chart. Based on this work, a move to $10,000 or higher is not out of the question (Figure 1).

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The equity market fear index (VIX) is jumping dramatically after hitting support near 14.64 (Figure 2).

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Figure 3 shows there is a head and shoulders top in an ETF of big U.S. tech stocks (QQQ). If QQQ continues to fall, there is risk of a bigger decline.

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Bottom Line: If you look at the news flow and the charts, it may be logical to assume capital flight out of China may benefit Bitcoin (BTC). Bitcoin (BTC) may also benefit as a safe haven asset or portfolio hedge for equities fund managers who fear a broader decline in stocks.

Crypto enthusiasts have waited for this for a long time — and have been disappointed many times. Dare we say it, but this time feels like the time for “Legacy markets down, Bitcoin (BTC) up.”