intermarket analysis: where bitcoin fits in

INTERMARKET ANALYSISWhere bitcoin fits in

WHAT INTERMARKET ANALYSIS DOES Combines All Markets into a Unified and Coherent whole.

Bridges Gap Between Fundamental, Economic, and Technical Analysis.

Examines the Correlations between Four Major Asset Classes: Stocks, Bonds, Commodities, and Currencies.

No Market Moves in Isolation, the World is Connected.

Traditional Intermarket Relationships The U.S. Dollar trends in the opposite direction of commodities.

A Falling Dollar is bullish for commodities; a rising dollar is bearish.

Commodities trend in the opposite direction of bond prices.

Therefore commodities trend in the same direction as interest rates.

Rising commodities coincide with rising interest rates and falling bond prices.

Falling commodities coincide with falling interest rates and rising bond prices.

Bond prices normally trend in the same direction as stock prices.

Traditional Intermarket RelationshipsRising bond prices are normally good for stocks, falling bond

prices are bad.

Therefore, falling interest rates are normally good for stocks; rising interest rates are bad.

The bond market, however, normally changes direction ahead of stocks.

A rising dollar is good for U.S. stocks and bonds, a falling dollar can be bad.

New Normal RelationshipsDollar and Commodities trend in opposite direction.

Stocks and Commodities trend in the same direction.

Falling Bond Yields have hurt Stocks-until recently.

What Has Changed? Deflation! 3 major deflationary events in the last 15 years.

1. Started with the 1997-1998 Asian Crisis.

2. The Dot Com Bubble.

3. Great Financial Crisis.

When deflation is the main threat stocks and commodities become closely related.

During a deflation bond prices rise while stocks fall.

Where are we now? King Dollar rules. Why? Abenomics has failed to stimulate Japan.

Eurozone is slipping closer toward deflation.

Fed Hawks want to raise US interest rates sooner rather than later and the market perceives this.

Still a flight to safety.

Who/what is a rising dollar bad for? Everyone and everything (except the US for now) , including bitcoin.

A rising dollar results in lower foreign currencies and stock markets.

Investment funds tend to flow toward countries with stronger currencies.

Stronger currencies are the result of higher or perceived higher interest rates due to stronger economic conditions in a particular country.

Bad for commodities as well.

Why is this chart so important? Chinese will see a further rise in its exchange rate, since other Asian

currencies will be pulled down by a sliding yen. Not good as China is is economic contraction. This will accelerate deflationary pressures.

A weakening yen spells deflationary trouble in West as it washes in from the East.

Strong US dollar is very bad for corporate profits.

All Other Currencies in the wake of a strong USD

Negatively Correlated

Commodities Crushed with a strong USD

USD and Commodities are negatively correlated

BRICS Performance Mixed?Getting some Divergences

Frontier Markets

European And Japanese MarketsRecession?

Reasons why bitcoin is a commodity and not a currency No instant way to settle at the moment for dollars.

Predictably “scarce”

Price is only rising with adoption and speculation

Its “mined” vs printed.

Rumors it will be regulated by the CFTC

Taxed as property in the US.

Needs adoption of sophisticated derivatives if its going to be held for periods of time.

The prevailing world view is one of inflation caused by money printing…but in fact deflation looks like the path of least resistance..The USD is the most liquid market in the world....bitcoin is not…USD is still the ultimate flight to safety