Monday, the NAZ rocketed nearly 400 points higher, closing at 13,588.83, in what now, in retrospect, can only be seen as a knee-jerk reaction to severe declines over the prior two weeks. Tuesday's affirmation via a 230-point loss served notice that stocks may have jumped the shark, so to speak, discounting the end of the pandemic by bidding up prices on the rumor.
And now, it's time to sell the news.
Nothing good can befall the overpriced NASDAQ at this juncture. If the effects of the pandemic wear off over the next few months, it will be assumed that buyers were premature in taking the NAZ to all-time highs. On Tuesday, Texas governor, Greg Abbott, announced an end to many of the restrictive executive actions that has kept the Lone Star State locked down and under a state-wide mask mandate for far too long.
His latest order will rescind prior orders and allow all Texas businesses to open at 100% capacity as of Wednesday, March 10. The order also ends the months-long mask mandate.
So, for tech investors, if the Texas gambit proves successful, the rally should stall out because it had already priced in the end of the pandemic. Should Abbott's executive order cause the virus to re-emerge, that would be bad for business all around and likely bad for tech stocks as well, making the current status of the NASDAQ - already down 5.2 percent - tenuous. For the year, the NASDAQ is up just three percent, making the next two to three weeks make it or break it time for the index and possibly the rest of the market.
While tech investors will likely continue to plow money into equities, the fate of bitcoin took a positive turn over the past few days. After dropping to a double bottom at $43,170 (prior low, $44,222, Feb. 10) on Sunday afternoon, the world's leading cryptocurrency has blown higher. Hodlers are waking up to find Bitcoin at $51,800 and higher, with a market cap once again approaching $1 trillion.
Bitcoin's previous high of $58,367 was achieved on February 21st. There's every indication that Bitcoin will exceed even some of the rosiest predictions for the year 2021 at its current trajectory, which includes bouts of 20% gains or declines over excruciatingly short periods of time. The normal pattern for bitcoin is to make 10-20% moves in hours or days, but, despite the apparent volatility, its movement is actually quite orderly. In other words, it's going to the moon and nothing can stop it.
Only brief periods of FUD or "whales" selling into the strength keeps it reasonably well-priced. Once it exceeds $50,000 and stays above that level, the pattern may become extended, but it will pull back, consolidate, and move forward.
With the all-time high again coming into view, the next likely stopping point is $70,000, roughy 20% beyond the current ATH. How soon it will get to that level is a matter of some conjecture, but if prior indications are correct, it can easily do it this month and continue to add value as the year progresses, even with a slowing trajectory.
Considering that in a recent three-month window - mid-November to mid-February - the price tripled from $16,000 to $48,000, it would not be outside the realm of possibility for another tripling in price over the following six months, putting it close to $150,000 before September. A mere doubling over the proceeding four months would have Bitcoin around $300,000 at the end of 2021.
While these predictions may alarm some (central bankers, mostly), there is little doubt over the value proposition Bitcoin presents in a world replete with failing fiat currencies. While probably a majority of investors and speculators will be put off by a price over $50,000 or $60,000, the consideration of a six-fold increase in 10 months certainly will be appealing to many, likely enough to move it considerably higher.
In the world of speculative investments and stores of value, Bitcoin has no constraints, as do gold and silver, the usually-reliable wealth-preservation vehicles. While precious metals will remain viable alternatives, they are unlikely to achieve the returns from Bitcoin, which legendary investor, Paul Tudor Jones" has called "the fastest horse in the race."
Taking the horse racing analogy a step further: While a very solid steed, few thought Citation could win 16 straight races, but that he did, between 1948 and 1950. Nearly 50 years later, along came Cigar, a turf campaigner switched to dirt in 1995, on which he matched Citation's feat of 16 consecutive victories against the best stallions in the world. The streak ended at the Pacific Classic at Del Mar, when he ran second to Dare and Go. Analysts and racing pundits contend that jockey Jerry Bailey committed a tactical error in the race, engaging in a speed duel with two other horses, Cigar the widest of the trio, causing all to tire in the stretch and be beaten by a closing Dare and Go.
The point is that rather than Cigar having an off day or some other mishap, it was likely that human error caused his defeat, the same as might be said of investors who haven't done their due diligence on Bitcoin and thus may miss out on one of the greatest investment opportunities of this generation.
Human error is the proximate cause of much pain and suffering. It doesn't have to be that way.
At the Close, Tuesday, March 2, 2021:
Dow: 31,391.52, -143.99, (-0.46%)
NASDAQ: 13,358.79, -230.04 (-2.69%)
S&P 500: 3,870.29, -31.53 (-0.81%)
NYSE: 15,277.02, -50.75 (-0.33%)
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