Today's Recommendation | Bitcoin's Second Half of 2020

Just in the early hours of the previous night, the U.S. federal court stated that Bitcoin is defined as a "currency" under the laws of Washington, D.C. It pointed out that the virtual currency Bitcoin is a "currency" covered by the Washington, D.C. Money Transmitter Act. Beryl A. Howell, Chief Judge of Washington, D.C., bluntly stated: "Currency is generally a means of exchange, a method of payment, or a means of storing value. Bitcoin is all of these things."

Then we saw the surge in Bitcoin and Ethereum. Bitcoin broke through $10,000 and Ethereum broke through $300.

The move comes just days after the Office of the Comptroller of the Currency (OCC) outlined a new policy in a letter published on July 22. The letter, addressed to an unnamed bank, states that national banks and savings associations can engage in custody services for bitcoins for their customers. Banks can already protect other digital items on behalf of their customers, including "providing secure network file storage, retrieval, and collaboration services for documents and files containing personal information."

All this means that Bitcoin is moving from darkness to light, but will it really be so easy to succeed?

The next decade may be the era when the "Avengers" represented by Bitcoin will compete with legal tender. And competition often means that this will be a long and infinite war.

When talking about fiat currency, we have to mention the US stock market. In the past week, the US stock market remained stable and hovered between 26,000 and 27,000 points. However, the stock of FANNG, a leading high-tech company, plummeted, and the negative correlation with the US stock index reached the highest level since 2009.

A hidden signal is telling everyone that the devil is approaching quietly. The total market value of FANNG's stocks has exceeded 25% of the total market value of the S&P 500. How did this happen?

The answer is obvious. During the pandemic, the US government released a massive easing of $18.5 trillion. This money flowed from society to listed companies through corporate bond issuance. Listed companies continued to use the money to repurchase their own company stocks and boost their market value. Just as young people from all walks of life in the United States were frantically pouring into the U.S. stock market, executives of various companies began to cash out and leave, which is the main reason why the U.S. stock market is stagnant.

Why are high-tech stocks highly concentrated? The younger generation of investors has driven the market towards high-valuation giants. In each round of market reshuffle, due to the high uncertainty of the economy and the young people's understanding of new things from the Internet, the final result is that funds will tend to be more concentrated in the leading companies.

Most young American investors have not experienced the era of saving money, so they easily transfer their chips to the capital market. What may eventually happen is that most of the over-issued US dollars end up in the pockets of a few people, completing a redistribution of wealth.

As the core of this round of US stock market surge, FANNG fell in advance, which has foreshadowed that the US stock market is unsustainable. Once it starts to fall, it is very likely to bring down the US stock market. The reason why the market continues to rise is that the Lehman moment in 2008 has not yet arrived. The massive over-issued US dollar currency represents that the US government, as the referee on the field, has already played the game itself.

Repurchasing stocks through corporate bonds will suppress the bomb that was about to explode, revive the listed companies that were about to go bankrupt, and continue to blow up the bubble. This is extremely dangerous. If the bubble bursts, it will lead to a historic tsunami.

In the coming period, all major high-tech companies will release their financial reports. The data that have started to fall can reveal the pessimism in the market. But I don’t think the US stock market will come to a sudden halt immediately, after all, the key weapon has not yet been put into use. What will really burst the bubble must be a decisive market turning point, and this market turning point comes from the end of US dollar liquidity. When the US central bank decides to shrink liquidity, it will determine the beginning of the market turning point. For example, starting a cycle of interest rate hikes. From past history, it is the reversal of liquidity that ultimately bursts the bubble.

The current U.S. stock market is still experiencing a situation of fewer investors killing more. Once a reversal occurs, the situation will turn into a situation of more investors killing more, and a large-scale stampede will occur. The result will inevitably be that tens of millions of investors will lose their fortunes.

I personally think that this time point will appear at the end of 2020 and the beginning of 2021. After all, the US election in November is over, and the market is not obliged to continue to maintain its strength. Liquidity will inevitably come to an end. However, there will be signs before the market sentiment begins to reverse. This time point is likely to appear at the end of September and the beginning of October. The rise of US stocks due to the epidemic is hollow in the whole process, which means that there will inevitably be a round of plunges. And this round of plunges is likely to be triggered by the intensified friction between China and the United States.

On the other hand, recently, the rise of A-shares attracted almost all the headlines in the circle of friends. Then, when the Shanghai Composite Index reached around 3,500 points, the music suddenly stopped and fell back to around 3,190 points. Everyone began to panic. In fact, going back to the beginning of the story, all the plots are connected.

In the same period, we saw that the executives of major listed companies began to cash out, and the market recovered, but it did not improve on a large scale. The duck knows when the river water warms in spring, and there will always be smart people who go ashore in advance. If the friction between China and the United States intensifies and global liquidity ends at the end of 2020, it is very likely that no one will be immune. The quantitative easing made by the Chinese government in response to the epidemic is currently the lowest in the world, and it has made it clear three days ago that it will not further relax liquidity, but only keep financial conditions loose to stabilize the recovery of the economy.

People involved in internal policy discussions also said that the People's Bank of China hopes to avoid the side effects of excessive stimulus, such as debt surges and real estate market bubbles, which shows that the country has made sufficient judgments about the future situation. If there is bound to be a global financial tsunami comparable to the 1929 global financial tsunami in 2021, then the danger of smashing from a high altitude of 30,000 points must be far greater than smashing from 3,000 points.

The beginning of the story has actually determined that there will not be a sustained surge in A-shares in 2020.

Taking 2020 as a starting point to think about the future, I think it is precisely the moment when the secondary money market such as the Chinese and American stock markets will have a bifurcation point. From the 30,000 point position of the US stock market, it may fall by 90% between 2024 and 2025, and finally return to around 3,000 points. The low point of the A-share market in 2021 may appear at around 2,700 points.

In the long run, China will replicate the old path that the U.S. stock market has taken. From the lowest point of the Dow Jones Index in the Great Depression cycle of the last economic cycle in 1975, the U.S. stock index has increased 30 times in the past 45 years. This is also the inevitable result of the key point that I have always emphasized in many articles before: there are only three variables in human society, namely demographic dividend, economic cycle and technological innovation.

The development of the United States is also accompanied by a huge wave of immigration. At the beginning of the last century, there was the third wave of immigration in the history of the United States. The total population of the United States reached 100 million. From 1820 to 1920, the number of immigrants accounted for more than 20% of the annual growth of the US population. The three waves of immigration in the history of the United States have had a profound impact on the formation of the American national character. The lower class of European whites and Mormons formed the loyal foundation of society. At this point in time, it happened that the previous economic cycle had reached a recession cycle, and the population growth reached a stage peak, and a demographic dividend fault appeared. On the other hand, the steam engine era reached its historical peak and began to decline, and the electrification era had not yet emerged.

These three waves of immigration brought about a large demographic dividend, which determined that the United States could rise rapidly in just a hundred years, replacing Britain as the number one economic power in the last century and laying the foundation for the world's largest empire thereafter.

It took a hundred years to reach 100 million people for the first time, and only 47 years to reach 200 million people. In November 1967, the U.S. population crossed 200 million, which just happened to correspond to the recession period of the previous economic cycle. It was at the midpoint of the recession, and the demographic dividend was broken again. The population reached 300 million in October 2006, which corresponds to the recession period of this economic cycle. It was at this stage that the U.S. demographic dividend had an unprecedented break. The United Nations predicts that the U.S. population will reach 400 million after 2050. It may correspond to the recession period of the next economic cycle.

Even though the population has been growing by 100 million, the growth rate has been declining. In fact, the US demographic dividend peaked in 2010. From the late 1980s to the early 1990s, we saw a large influx of African Americans, Mexicans from South America, and others into the US, followed by Asians such as Koreans, Indians, and Chinese. It is precisely for this reason that the huge ideological split in the US has occurred today.

In the past 45 years, the US stock market and the American Dream are the only ideologies that can integrate all ethnic groups and religions. Dreaming is not scary, because for a long time, you will feel very happy and can numb yourself with other people's stories. What is scary is when you wake up from the dream. In the past 100 years, the United States has experienced two economic cycles and has been the leader in both cycles. In between, at least 5 to 6 generations will have memories of the American Dream, and generation after generation will tell you about the greatness of the United States.

In fact, to be more pitiful, this is an illusion. The entire history of the United States is only a short 200 years, and time is not deceiving us. If we regard the entire history of the United States as a stock, you will find that the surge of civilization in such a short period of time often means a longer period of plunge.

If 400 years is taken as the national cycle of the United States, the first 200 years have been a period of recovery and prosperity. 2020-2024 may be the peak of prosperity for the United States, and the next 200 years will be a period of recession and depression.

As long as the cycle is extended, all human behaviors and laws can be predicted. Short-term social changes are just a drop in the ocean. The only standard for measuring everything is time.

When it comes to time, it happens to be on China's side. In the past three decades, we have seen China complete huge household savings in the form of bank deposits and real estate infrastructure. In fact, before the 1970s, the United States also went through such a stage, with a savings rate of up to 75% and real estate investment, and then turned to stock and financial investment.

If the Shanghai Composite Index is measured against the 3,000 points in 2020, compared with the United States, the future upside may reach about 90,000 points, which is 30 times the space. But for some reason, I tend to think that this time will be shortened by half, and the possible time point will be around 2044.

This will be different from the past development of the US stock market. This round of A-share rise will inevitably be driven by value stocks in the early stage, while the later development will be centered on growth stocks, that is, stocks of various high-tech companies. The vigorous development of such stocks in the next 25 years will accelerate the overall valuation. After all, the valuation of high-tech company stocks is much higher than that of traditional companies.

On the other hand, the core theme of the next economic cycle will be technology finance, which also happens to indicate that the stock market and the digital currency market will develop in parallel for a long time in the future. Personally, I think the stock market will eventually give way to the digital currency market, because stocks, as a certificate of value circulation, cannot be used directly in application scenarios. The rules of the game are regulated by the government, but there are a lot of details in the middle that may cause information asymmetry.

Originally, stocks are the secondary currency market, which is the embodiment of the legal currency standard of each country. In the process of machine network development, the distribution of data value will become the main contradiction in the future social development. The core tool to solve the problem of data value distribution is digital currency.

It can not only speed up circulation, but also reduce government administrative costs. It has a wide range of application scenarios and large-scale purchases by the entire society. Based on the liquidity of digital currency itself, it can be estimated that its circulation will be uninterrupted throughout the year. The global uninterrupted way will greatly absorb the population growth. Not only the domestic groups, but also more overseas user groups.

For the Chinese government, all of this can be solved by using DCEP for purchases and circulation, and the ownership of the data can be returned to the chain. The government only controls the entry and exit of the traffic, perfectly resolving the contradiction between privacy and supervision.

China's demographic dividend has already reached a turning point this year, with the aging population surpassing newborns for the first time. The next five years will be critical, and I tend to think that the government will gradually open up population fertility. If it does, I believe China can extend its demographic dividend period by at least five years.

I believe that China's future will not be like the United States, where black Africans, South Americans and Southeast Asians are introduced to achieve immigration, which is not conducive to a high degree of ideological unity. What is more likely to happen is that China's population will continue to grow, and then through the "Belt and Road Initiative" these people will stay in their own countries and contribute to society, and globalization can be achieved without immigration.

In the future, China will begin to move towards an era where domestic demand is the main driving force. This means that for a long time in the future, China will open its inland market to countries around the world and obtain the world's top technology, the most advanced products and the best talents. This also means that we may move towards a long-term trade deficit. Long-term trade deficits and long-term investment surpluses are just two sides of the same coin. This process is the gradual internationalization of the RMB. The birth of DCEP is timely, which is also a preparation for the de-dollarization of the RMB. In the future, it is enough for the RMB to be anchored to DCEP.

Many people say that globalization is dead, which is an extremely narrow view. The essential difference between the internationalization of the US dollar and the RMB is the difference between "private chain" and "alliance chain".

Globalization in the dollar era pays more attention to the dollar itself. The collapse of the Bretton Woods system and the forced lock-up of gold by the United States are the beginning of using gentlemen to command the princes. Forcing all countries to rise and fall together with it was the norm of the dollar hegemony in the past. Globalization in the RMB era is to keep data, talents, and currency in the local area. In the form of DCEP, we invest in the local area and grow bigger and stronger together.

This is of course globalization, and it is an upgraded version of globalization. I believe that after the Great Depression, the country will give state-owned enterprises, private enterprises and foreign enterprises the same national treatment, so that the whole world can share the opportunity of China's explosive development in the next 50 years. This time point should be in 2024.

It is also at this point in time that Eastern ideology, centered on China, will gradually replace the Western culture we see today. After a hundred years, Eastern civilization will once again become the protagonist of global civilization.

In the next 20 years, the core of the global struggle will undergo major changes, from the original struggle between China and the United States to a dynamic balance between the "alliance chain" national alliance with China as the main node and the old economic forces under the "private chain" of the United States. Choosing China means choosing independent development, sharing results, and growing together. Choosing the United States means that there will be fewer and fewer opportunities in the future, and the national economy will be in a long-term downward trend.

After all, the decline of the US dollar is a historical inevitability, and it will eventually give way to Globalization 2.0 led by DCEP, ushering in a new era for mankind.

Bitcoin has also appeared at the right time at the turning point of history. 2020 is not the year for Bitcoin to be the protagonist, but more like a warm-up, preparing for the upcoming historical node. The friction between China and the United States has intensified the intensity of this warm-up.

If many people pay attention, they will know that in the past week, gold has risen above 1890 points, close to the historical high of 1921 points. Bitcoin also happened to start a wave of upward momentum at this time. The high overlap of the rising K-lines of gold, silver, Bitcoin and Ethereum illustrates a very detailed problem.

That is, when Wall Street capital is making global investment strategies, it has already included high liquidity, value investment, and global investment products, thus forming a resonance. Seeing the rise of Bitcoin and Ethereum, the first thing we should think about is why gold and silver are rising? It is because of inflation expectations.

Since the global outbreak, the Federal Reserve has over-issued a large amount of US dollars, which has led to the possibility of future inflation, so anti-inflation assets will start to take the lead, and gold and silver, Bitcoin and Ethereum have begun to rise. However, expectations are only expectations after all, and the fact is that inflation has not yet shown any signs.

What does the final landing depend on? Crude oil. Today, we see that all resources and goods in the world are produced based on the price of crude oil. Why has the massive over-issuance of the US dollar lasted for so long, and we have not seen the start of inflation, but only an "expectation"? This is because after the sharp drop in crude oil prices, it is now hovering at a low of around $30. This is obviously too low, but now is at an extremely delicate time point.

Being at a low level does not mean that it will rise immediately. This depends on many dimensions, such as the deepening of Sino-US frictions and the start of a hot war; for example, Trump seeks re-election and uses the suppression of crude oil prices as a bargaining chip to exchange for more political benefits. Then it will become a chain reaction.

Inflation expectations are met, gold, silver, Bitcoin and Ethereum are soaring, crude oil prices are slow to rise, inflation expectations are over, U.S. Treasury yields remain unchanged or even rise, and gold, silver, Bitcoin and Ethereum respond to the market with a plunge.

So the surge in Bitcoin we see today is the inevitable result of the resonance of Wall Street's full strategy quantification and value investment products driven by inflation expectations. I mentioned in my previous article that this rise will first break through 10,000 points, and then test 13,000 points, and may even go to 16,000 points. It all depends on time, and time is the most important criterion for measuring everything. However, inflation expectations are time-sensitive. If crude oil prices do not rise for various reasons in the next two months, then basically, we will see a double blow to Bitcoin from the decline of US stocks and the collapse of inflation expectations.

The best time to buy the bottom may be in December. Back to the point I have been emphasizing in my article half a year ago, 2020 means the repetition of long and short double kills. The 312 Bitcoin circuit breaker is the first time, but it will not be the last. When everyone starts to blindly believe in the rise of Bitcoin, the crash is likely on the way.

But history has opened a door and written a footnote for Bitcoin to move to the main stage of historical drama. The collapse of human finance is an inevitable result. Systemic laws are not subject to personal will, just as human nature is as old as the mountains and unchanging.

The theme of technology finance will be kicked off by Bitcoin in 2021. Both "private chains" and "alliance chains" will eventually give way to "public chains". However, in the next 10 years, they will coexist and fight overtly and covertly. The turning point of Bitcoin will appear in 2024, and in 2026, everyone will begin to see early applications and products emerge and gradually be accepted and recognized by legal currency. After 2030, Bitcoin and DCEP will jointly move to the center of history.

What are the gold and the dollar in the new era? Bitcoin and DCEP are the future forms.

This is destined to be a vigorous upgrade and iteration of the human system. History will remember that it all started in 2020.