One year ago, I was on the precious metals panel at the New Orleans Investment Conference. I was asked if cryptocurrencies had replaced gold as a safe haven.
I laughed, answered no, and explained we would have more clarity once cryptocurrency traders had their faith tested.
They are having that faith tested and most - surprise, surprise - have capitulated and moved on.
Bitcoin has dropped approximately 80% from its all-time high.
The break-even cost to mine a single Bitcoin using Bitmain's Antminer S9 rig was estimated at $7,000 in a Nov. 16 report by Fundstrat Global Advisors.
Bitcoin is currently trading at approximately $3,500. The hash rate is down over 24% from an all-time high reached this past August.
"This suggests that prices have declined to a point where mining is becoming uneconomical for some," JPMorgan strategists led by Nikolaos Panigirtzoglou wrote in a Nov. 23 report, in reference to the falling hash rate.
The conventional wisdom says two Bitcoin factions tried to take over the network and the name of Bitcoin Cash, the world's fourth-biggest cryptocurrency. The spat led to market uncertainty and drove down its price by almost 50%, contributing to the slide in Bitcoin as well.
Is this the bottom? Are cryptos over? I'm not entirely sure and won't pretend to know the answer.
It doesn't help that the IMF has recommended that all central banks issue their own cryptocurrencies.
Make no mistake, it's all about controlling the money supply and controlling tax revenues would be priority number one.
Central banks can use the blockchain technology to track taxes, impose negative interest rates at will, and prevent bank runs.
I do believe that gold has held up recently as a result of sector rotation and an entry point in the commodity space that is compelling for even the biggest institutions. That's positive.
Meanwhile, in Europe, there's still the budget standoff in Italy, a German contraction - recent data points to the weakest private sector growth in almost four years - and the realization that the $2.6 trillion-euro bond buying program, which was due to be capped, probably will need to increase.
You think the dollar has support now? Wait until the day where there are no bids at a bond auction overseas.
Think about this: Europe is in a recession with negative interest rates.
Here's some more food for thought. 90% of global assets - according to money laundering kings Deutsche Bank - have a total negative return year-to-date.
The bank has tracked 70 asset classes since 1901 and this is the highest level since 1920.
Here are some more sobering facts supporting my case for QE 'til infinity in late 2019 (and then I'll stop).
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Global monetary base, deflated by U.S. CPI, is shrinking. It has shrunk just five times since 1980. Each time, what followed was monetary easing (and global slowdowns).
All this bodes well for gold in the second half of 2019.
A pause in rate hikes, increased global volatility, a deflated crypto space, and a cannabis space that may now reset and take a more sober and accurate look at valuations is the complete opposite of the trading action in the past year and a half.
Take advantage of the next week or so of tax-loss selling and the next quarter or two of lower gold and silver prices. The tide may finally be turning.
To your wealth,
Gerardo Del RealEditor, Junior Mining Monthly and Junior Mining Trader.
For the past decade, Gerardo Del Real has worked behind-the-scenes providing research, due diligence and advice to large institutional players, fund managers, newsletter writers and some of the most active high net worth investors in the resource space. Now, he is bringing his extensive experience to the public through Outsider Club, Junior Mining Monthly, and Junior Mining Trader. For more about Gerardo, check out his editor page.