Lets start with some controversial news that is shocking world markets across the board...

Huge capital gains tax increases bill proposal in the United States is battering the traditional investing world. The proposal is to raise capital gains tax for the best and brightest minds in our economy by 19.5% for US Citizens making more than 1M per year. What happens when fear of loss gets stricken into the markets and the largest players?

News driven catalysts can often be the most difficult, lets take the fear of corona virus as an example that we can all relate to. This fear caused the worst world wide market crash since the great depression. Fear of oil conflicts and lack of demand drove oil prices to $-37 per barrel. Yet of all recoveries from the past year Bitcoin and Cryptocurrencies have by far been the most impressive. Bitcoin made a recovery of around 18x from its last year low of $3,800 to a historic level of approximately $64,000. This comes from many catalysts; the adoption of Bitcoin as an institutional investment instrument, people being stuck at home causing the retail customer base to increase dramatically in the world of crypto and events such as mass printing of the world reserve currency. The Dollar and Dollar Index have always been on a slow decline as is no secret. The average rate of inflation in the past years has been a slow and steady bleed of 2-3% per year.

Data from the Fed shows that a broad measure of the stock of dollars, known as M2, rose from $15.34 trillion (£11.87 trillion) at the start of the year 2020 to $18.72 trillion in September. The increase of $3.38 trillion equates to 18% of the total supply of dollars. It means almost one in five dollars was created in 2020. M2 includes physical notes and coins, banks reserves held at the Fed, accounts at banks, and money market mutual funds. A narrower measure of money known as the monetary base or M0 – which is physical money and bank reserves at the Fed – rose from $3.44 trillion in January to $4.8 trillion in August. That is a 28% jump. As the US Dollar is the World Reserve Currency and effects us all I like to keep a close eye on it, lets take a peek at the DXY chart:

Friends the reason I am bringing these types of things to your attention is because Bitcoin and Cryptocurrency are becoming more main stream every day. We can not limit our understanding to just one small aspect of the global economy such as crypto. All parts play a role especially the movement of the currencies we use as a base for our crypto trading endeavors. In the chart above I have highlighted the areas we need to watch. First is the "Area for Extreme DXY Capitulation", the DXY has been testing and finding support on this downward sloping trend line since August 2015. We now find that the index is once again floating at this downward sloping level. What we know about the US Dollar is that it is always "losing value" historically, so we can apply traditional analysis to this index just as any other. The more times a level of support or resistance is tested, the weaker it becomes. We can only apply a downward bias to an inflationary asset... especially one with no cap of inflation. Therefore my general analysis of the DXY follows the blue arrow or a similar pattern of decline. This chart is on the Weekly Timescale so this will literally take years, it is best that we know how the reaction of this kind of action in a basket of currencies will effect our investments into risk on assets such as equities, securities and digital assets.

As always friends, stay strong and be safe. The future for fiat currencies may not be bright, but risk on assets will continue to thrive over the long haul. This market dip is just a small hiccup in an inevitably bright future!

Killer Whale Crypto