Are You Ready for the Next Bitcoin Crash?

Is bitcoin a smart investment?

I don’t think so…

Remember when US$400 million worth of bitcoin was stolen from Mt Gox in 2014? That’s what they were worth at the time, mind you. The hack led to a two-year cryptocurrency bear market.

The company recovered 200,000 bitcoins. Nobuaki Kobayashi was put in charge to sell them for clients. He’s the trustee of the Mt Gox trust fund. If you’re a crypto fan, Kobayashi isn’t your friend. He sold roughly 40,000 bitcoins into February:

Bitcoin chart 02-05-2018

Source: Zerohedge
[Click to enlarge]

Bitcoin peaked when he started selling in early December. CME, the world’s largest futures exchange, launched a bitcoin futures contract around the same time. The Conversation reported on 14 December:

Bitcoin futures could actually end up reducing the price of Bitcoin. Futures trading gives new investors the choice to bet against Bitcoin and also allows them to settle contracts in dollars, boosting their liquidity.

‘Plus, Bitcoin futures allows investors to trade off the cryptocurrency without actually owning it. This protects them from any volatility in the real-time spot market. This could reduce the demand for Bitcoin, pushing down prices.’

Indeed, thanks to Nobuaki Kobayashi and the launch of bitcoin futures, the cryptocurrency market was punished this year. To make matters worse, the digital coin still isn’t widely accepted as a currency.

In fact, it probably won’t be used as one in our lifetime. You can’t go into a supermarket and buy bread with bitcoin. The transaction costs are also a joke. And while that may change over time, it doesn’t look like that’ll happen anytime soon. So in a world when we’re all looking to make a buck, I see more negatives than positives.

The warning signs are everywhere…

The next bitcoin crash looms…

TNW (The Next Web) reported last Tuesday:

You can expect some serious volatility in the cryptocurrency market…if history is any indication. Notorious cryptocurrency exchange desk Mt. Gox — which went down in 2014, along with 850,000 of its users Bitcoin — has moved another huge batch of its remaining funds to consolidated wallets.

The now-defunct exchange desk seems to have transferred 16,000 BTC and 16,000 BCH to two separate addresses, according to a Mt. Gox cold wallet monitor.

This is the first time that Nobuaki Kobayashi has moved coins to another wallet since February. TNW continued:

It appears that the Mt. Gox trustees have moved the funds to a wallet belonging to an exchange desk,” cryptocurrency trader and speaker Ivo Jonkers told Hard Fork.

The last time this happened, Mt. Gox proceeded to sell the funds at market rate, practically sending the entire market in the red.

I wouldn’t be surprized if this happens again’.

Kobayashi is sitting on about 160,000 bitcoins on my numbers. That’s worth roughly $1.45 billion dollars in today’s prices.

He plans to offload it all at some stage.

The last bunch of sales crashed bitcoin to US$6,000.

What will the next bunch of sales do?

16,000 bitcoins could hit the market at any time. That’s certainly less than the last raft of selling. Still, even if bitcoin dips slightly lower, Kobayashi still has another 146,000 bitcoins to sell according to my numbers.

It doesn’t sound good…

Regulation could also destroy the cryptocurrency space, sending prices sharply lower. That’s why bitcoin is trading around US$9,000 today. The majority of institutions don’t take it seriously. So, while crypto punters ignore the risks, we suggest following another sector instead: gold.

The next gold bull market could start later this year.

Gold on the verge of higher prices

If history repeats as expected, the best junior gold stocks could go up thousands of percent. But take note: ‘penny gold’ stocks generally take off when the bull market becomes clear to the majority.

That takes time…

Most punters are late to the party and only buy what’s hot. That’s why confidence must return to the sector before the real fun starts. That hasn’t happened yet. Punters have been burnt too many times on gold stocks and are waiting for the bull market to start. That’s why junior gold stocks remain depressed, with capital largely avoiding the sector today.

That won’t be the case forever, mind you.

The yellow metal is cyclical by nature. It goes in and out of favour just like any other sector, like any other commodity. Precious metals should eventually make a come-back. But that doesn’t mean every gold stock will skyrocket by hundreds to thousands of percent.

If you want to make the most gains, you need to own the hottest stocks in the sector.

Future punters should be attracted to the stocks with the most exciting stories, which boast the greatest potential. The Gold & Commodities Stock Trader buy recommendation list is full of these stocks.

To find out more, go here.


Jason Stevenson,
Resources Analyst, Gold & Commodities Stock Trader

Jason Stevenson is Markets & Money’s resource analyst. He shares over a decade’s worth of investing and trading experience across resource stocks and commodity futures and options. He originally studied accounting and finance at Curtin University, where he was awarded a first-class honours degree. His professional background stems across high-net-worth, top tier accounting (corporate finance, tax and auditing), and sell-side equities research. Before joining the team at Markets and Money, Jason worked at boutique firms which advised fund managers and high-net-worth clients on where to invest. Whether it’s gold, crude oil, copper or an obscure metal like vanadium, you can rely on an in-depth analysis in Markets and Money. Jason also brings you extensive macro, political and geopolitical analysis from around the world. He leaves no stone unturned when it comes to telling the truth. Jason is also the lead analyst of Gold Stock Trader, a premium service for investors serious about precious metal stocks. Websites and financial e-letters Jason writes for:

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