The Halving Has Arrived
The Country’s Scary Split Personality
I have been thinking (could be dangerous) about the bitcoin halving. VanEck’s Matt Sigel, Head of Digital Asset Research, has a great new blog post on the halving, linked here. Matt’s article is a great explanation of the halving. This has historically been a bullish event for bitcoin. I wonder if that will be the case this time. I am definitely getting out of my commodity comfort zone here, but this does not happen to gold or copper miners. It would be a problem for traditional commodity miners if their mining costs doubled overnight. Currently, bitcoin miners are rewarded with 6.25 bitcoins for every block they solve. On Friday they will be halved. So they will get 3.125 bitcoins. Sounds bad for miners. If costs rise for gold and copper miners or for that matter, oil and gas producers, they cut production. When prices rise above the cost of production they increase production. Commodities are very simple. Bitcoin not so simple. I recently sold some property to a bitcoin miner who used some of his mined bitcoin to buy the property. He actually sold the bitcoin at 72,500. Lucky or smart? Who knows. We settled in dollars. He has always planned on shutting down his mining operation at this halving. In his case, he is facing higher energy costs and does not want to upgrade his equipment. It was always his plan to shut it down. But for bitcoin, the miners actually keep the ledger for all the existing bitcoin. If there are not enough miners to keep the ledger, what happens to Satoshi Nakamoto’s bitcoin? Does it still exist?
Bitcoin is not the only thing experiencing a halving. The world is halving and so is the U.S. The country has a split personality. Half for the Tin Man and half for the Orange Mad King I. Very scary stuff. The Tin man is out on the campaign trail this week while the Orange Mad King I is falling asleep in a NYC court room. The Tin Man really seems to be enjoying himself, making fun of the Orange Mad King I. It’s not a great week for the Orange Mad King I. He can’t go to his son’s graduation and his media company, DJT has collapsed. $6 billion gone, like magic. Easy come easy go. The world is also halving. The West vs China, Russia, Iran and North Korea.
Markets are mixed this morning after a choppy unchanged day yesterday. Jay Powell, as expected, confirmed the higher-for-longer interest rate mantra other Fed officials have been preaching. The S&P and NASDAQ 100 are both due to open higher at the moment but are still below the 50 day averages. Commodities are mixed this morning but remain in strong uptrends. As they say on the All-In Podcast, “let your winners ride”.
I updated the U.S Dollar Index, U.S. 10yr yield, WTI crude oil, copper, spot gold, bitcoin, S&P futures and NASDAQ 100 futures charts below.
The dollar and interest rates are both slightly lower.
Crude oil, copper and gold are all close to unchanged. Gold closed at new all-time highs again yesterday. Bitcoin is unchanged.
S&P and NASDAQ 100 futures are both a little higher this morning.
IMPORTANT DISCLOSURES AND DEFINITIONS
Unless otherwise stated, Bloomberg is the source of all data and charts.
S&P 500 futures are a type of derivative contract that provides a buyer with an investment priced based on the expectation of the S&P 500 Index’s future value. Nasdaq 100 futures are commodities futures products traded within the equity futures sector. West Texas Intermediate (WTI) oil is a benchmark used by oil markets, representing oil produced in the U.S. Brent Crude Oil is a blend of crude oil recovered from the North Sea in the early 1960s, whose price is used as a benchmark for the commodity's prices. The U.S. dollar index (USDX) is a measure of the value of the U.S. dollar relative to the value of a basket of currencies of the majority of the U.S.'s most significant trading partners. UBS Bloomberg Constant Maturity Commodity Index is a total return rules-based composite benchmark index diversified across commodity components from within specific sectors.
The information herein represents the opinion of the author(s), an employee of the advisor, but not necessarily those of VanEck. The securities/ financial instruments discussed in this material may not be appropriate for all investors. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
This material has been prepared for informational purposes only and is not an offer to buy or sell or a solicitation of any offer to buy or sell any security/financial instrument, or to participate in any trading strategy.
Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data.
All investing is subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that investment objectives will be met and investors may lose money. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future performance.
Maybe both smart and lucky?