Bitcoin crashes just like the last time Goldman Sachs got involved.

Such a coincidence.

Goldman Sachs offers bitcoin derivatives to investors- Bloomberg News 7 May 2021

In a flash back to the last time Bitcoin crashed, here is my chart from long ago on this blog.

My short answer is that adding futures or fake derivatives to the market was in effect dumping a massive new supply for investors to trade in. And as you will see below, Bitcoin is very much driven on *marginal* supply and *marginal* demand. So it does not take much to wipe out trillions of *paper* wealth.

Let me explain how I described what happened after the first crash.

Back in 2018, I introduced a new concept. Marginal supply and demand…

Here is a new concept…

…bear with me.  I’ll start with an extreme example to help keep your eyes from glazing over – Bitcoin.

I wrote about Bitcoin Lessons & Stock Market Melt-Ups back on 4 January.  The main takeaway was that JP Morgan found “that a mere $6 billion in net inflows… resulted in a market cap [increase] of $330 billion.”

Think about that awhile… how can $6 billion in buying increase the total value of all outstanding stock to $330 billion.  That means for every $1 invested in buying Bitcoin, Bitcoin’s market cap went up $55!   Huh?

The answer is marginal supply & demand with the focus on the word “marginal”.

Stay with me… if the current holders of Bitcoin would not sell but demand grew then the price had to surge to bring out sellers.

the short history of Bitcoin

In this chart I explained that after vocal resistance, Goldman finally rushed Bitcoin into the future’s market which correlated perfectly with the top. Why?

First, this provided another form of supply for investors. And second, we know the Goldman CEO publicly said that one of their traders “stole” code and CEO was worried because the code would allow him to *manipulate prices*!

No one in the financial media asked him why Goldman Sachs would have such a code.

So how did Bitcoin get allowed to come back.

Wall Street found a way to make money off it. But hedge funds piled in an spiked the price again. The central banks do not like crypto infringing on their monopoly to create money so crypto is getting taken down in the markets.

And NOW we are seeing central banks come out a say that Crypto is a problem or needs to be regulated, etc. Goldman appears to have helped them.

This is not a factor in TSP investing or other index funds, but it tells us a lot about our money system and how markets can be controlled to a point. And more important, how many narratives are controlled too.

TSP Smart & Vanguard Smart Investor supports serious and reluctant investors… but not speculators and meme stock chasers.

Categories: Perspectives