Most people are not willing to call an end to this idiot bubble, because they don't want to stand out in the crowd...
What we've learned in this era is that when people see ludicrous speculation in markets they merely assume it will become even more asinine before it ends. Hence, it conveniently has no known end point. So we're told.
Stop me any time...
First, let me set this up - back near the top of stock market in early 2007, the housing bubble was already collapsing in many parts of the country and investors were already realizing that subprime loans were a disaster in the making. So ironically as the crisis escalated and investors backed off of subprime mortgages, Wall Street cooked up even riskier leveraged bets in order to juice returns and entice investors:
March 30th, 2007:
"With the subprime mortgage crisis making investors wary of collateralized debt obligations, or bonds secured by other bonds, Wall Street is cooking up even riskier deals offering bigger returns to lure hedge fund investors"
That same year when the Fed began lowering interest rates, the global hunt for yield accelerated which allowed Wall Street to sell ever riskier subprime-loaded time bombs to money managers desperate to meet their annual return targets. In July of 2007, the CEO of Citigroup Chuck Prince was asked his thoughts on the escalating subprime crisis. He said he believed the Fed had it under control and therefore his bank was going to keep "dancing while the music is playing".
Now we are hearing the same rationlizations today being applied to Ponzi schemes:
"Dogecoin is now valued at more than $50 billion, exceeding Ford Motor Co. and many other companies with extensive histories...Stock market operators who have been around for a few cycles know the sentiment implications of something like Dogecoin: time to grab the canned goods and head for the bunker"
As former Citigroup Inc. Chief Executive Officer Chuck Prince infamously said in 2007 right before the subprime mortgage bubble burst and caused a financial crisis, the music is still playing, so you have to keep dancing."
The author goes on to claim that it was rational to keep gambling in 2007 and 2008 amid escalating levels of risk. He admits that when the crash took place, the people who were most off guard were "the experts", whereas many "perma-bears" had already predicted the inevitable outcome. In other words, since no one can predict the exact day when insanity will end, gambling up until the very day of meltdown is the rational choice. However he admits that if people had known the extent of what was coming, it would have made sense to de-risk ahead of time. But he claims that the extent of meltdown is also conveniently unknowable ahead of time.
Call it the monetization of practiced ignorance. It can come as no surprise that the financial media who are now forced to cover joke-memed crypto currencies must find a rationale for this insanity that ensures a perma-bullish outcome. Otherwise, their subscriber base would collapse like a cheap tent. One wonders how many more times the general public will look back fondly at all of these dunce "experts" and the dumbfuck media and laugh at their corrupt excuses for ignoring conflict of interest. I will go out on a limb and say this is the last time.
Here we see that the magnitude of the Ponzi Crypto bubble exceeds the size of the subprime bubble and is 100x the size of the Gamestop debacle. It will be extreme irony if the Crypto Ponzi bubble peaked the very same week that Bernie Madoff died. So far, that indeed does appear to be the case.
This chart best combines all of the excesses of this era into one exploding weapon of mass destruction. Crypto searches on Google have exploded to an all time high this week. Which is deja vu of January 2018. And of course the combined magnitude of crypto market cap and stock market margin balances far exceeds what attended the 2018 explosion:
I wrote an essay on the impending Bitcoin/Blockchain collapse, but it's too long to include this time around. So without all of the background technical jargon, here is my overall hypothesis regarding the long-term instability of Bitcoin and crypto currencies:
My overall hypothesis regarding price stability is that speculators drive prices higher due to the liquidity/scarcity constraints designed into the Bitcoin network. Miners react by adding additional computing power to the network, which takes place on a lagged basis. This time lag between supply and demand is a prime opportunity for price manipulation aka. pump and dump schemes. In time, the mined supply increases to match demand. At that point, the price momentum slows and then reverses, at which point speculator demand vanishes and the miners are left selling mined Bitcoin into a bidless market. At that point, the price very rapidly resets back down to the marginal cost of mining which is defined by the underlying cost of server capacity and electricity. In other words, miners arbitrage away all excess profit from the crypto network as one would expect from basic economic theory. Unlike gold production there are no major barriers to entry for crypto mining. The cost of these bubbles and busts accrues to latecomer speculators.
In addition, miners can easily switch from one crypto currency to another, so they pick up and move to whichever crypto currency offers the best profit margins. At present that is no longer Bitcoin. Which is why the Bitcoin hashrate collapsed last weekend when Dogecoin went vertical. The same thing happened in 2018 when all of the other cryptos started outperforming Bitcoin. As a consequence the Bitcoin transaction fee has exploded back to levels not seen since January 2018:
I posted this chart yesterday on Twitter:
A couple of weeks ago I described the blockchain death spiral hypothesis, which posits that in a large enough crash, miners will leave the Bitcoin network en masse which would prevent anyone from buying and selling Bitcoin. For long-term holders this may not seem like a problem, but for hedge funds and leveraged Robinhood home gamers it's a huge problem. If speculators have illiquid holdings, then brokers will sell whatever other liquid collateral is available. Which is why asset correlations converge at 100% in downside panics. One could imagine that having $2 trillion in illiquid crypto sitting in speculator accounts could have massive spillover effects in other markets. The Bitcoin price could be collapsing and yet it would be impossible to sell Bitcoin, so everything else gets liquidated instead.
On that note, I will point out that Ethereum has the clearest wave count. As we see it's trending in correlation to Momentum stocks which have entered their third wave down.
In summary, it could turn out that Bernie Madoff perfectly timed two cycle end explosions.
We haven't heard this in a while...