The Road Narrows For The Bull Market

Submitted by QTR’s Fringe Finance

I’ve been pointing out over the last couple of months that I think crypto could wind up being the canary in the coal mine for future market volatility. I think it was Shakespeare who once said: “So goeth fartcoin, so goeth the entire global economy”.

And just a couple of weeks ago, when Google announced the arrival of their Willow quantum computing chip, I raised the critical question of whether or not crypto—and specifically Bitcoin—would still be hacker-proof if quantum computing arrived faster than we expected it to.

Since that article in early December, there have been continuing signs that the American consumer, and by proxy investors in the stock market, are likely getting stretched.

The biggest new sign is that credit card data for that same month, released just days ago and reported on by Bloomberg, confirmed that U.S. consumer debt soared by $40.8 billion in December, marking the largest monthly increase on record. This sharp rise follows a revised $5.4 billion decline in November and surpassed all economist forecasts in a Bloomberg survey.

Source: Bloomberg

The report showed that revolving credit, including credit cards, jumped $22.9 billion, more than offsetting the previous month’s drop. Non-revolving credit, such as auto and student loans, rose $18 billion—the biggest gain in two years—driven by a surge in year-end auto sales, the fastest pace since May 2021.

And even more notably, delinquency rates are climbing, with 3.5% of credit card balances overdue by 30 days or more, and 1.8% of accounts delinquent—both more than double the post-pandemic lows of 2021.

As the American consumer was redlining their credit cards the same month Google’s quantum computing processor was announced, investors didn’t seem to care. Concern about Google’s processor was short lived and quickly swept under the rug, with Bitcoin bulls assuring each other the network would evolve in time for whatever comes next.

I can’t help but think this could be a devastating case of willful ignorance. Even Tether’s CEO was forced to admit this week that quantum computing will eventually hack inactive Bitcoin wallets, bringing lost BTC back into circulation.

“Any Bitcoin in lost wallets, including Satoshi (if not alive), will be hacked and put back in circulation,” Paolo Ardoino said in a Feb. 8 X post.

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While active wallets can adopt quantum-resistant protections as they emerge, lost wallets are more vulnerable since there’s no one to secure or move the funds. Ardoino noted that wallets controlled by living users will be migrated to “quantum-resistant addresses.”

When you have the CEO of one of the key components in the crypto universe urging immediate caution, it’s something that shouldn’t go ignored. After all, it’s widely accepted that if Satoshi Nakamoto’s Bitcoin—estimated at around 1 million BTC—were to move, it would trigger massive market volatility, potentially causing panic selling due to fears of a large-scale dump or speculative buying driven by renewed interest. Such an event could shake investor confidence, raising concerns about Bitcoin’s decentralization and security. It would also spark intense global speculation about Satoshi’s identity, possible legal ramifications, and pressure for protocol upgrades to enhance security.

Ultimately, the movement of these coins would mark a new epoch in the era of bitcoin — one where its unblemished track record of success is anything but a guarantee.

And I’m here to tell you that just because nobody is talking about this doesn’t mean that the risk isn’t growing underneath the surface. After all, this is how almost all financial crises—regardless of the catalyst—develop. As I was explaining on a podcast about black swans last week, one day you go to bed and everything is fine, and the next morning you wake up, and behavioral psychology on the street has changed drastically—so much so that you may already be behind the rest of the world simply by having gone to bed that night.

And with the growing number of exchange-traded funds, leveraged ETFs, zero-days-till-expiration options, and other ways that speculators can simply gamble—becoming the tail that wags the market dog—I’m predicting that future chaos in markets will happen at a sharper pace than we’ve ever seen before in history.

The key lesson here is to stay on guard, if you ask me. It’s a simple, logical line of reasoning. I believe crypto is the tip of the spear as far as risk and speculation in the markets. This not only makes it most susceptible to a pullback but puts the asset class first in the pecking order of assets that would be sold off anytime investors need to raise cash.

It is a brand-new asset class, with barely a decade-long track record to fall back on in a substantial crisis, with one of its biggest CEOs issuing a backhanded warning about a new burgeoning risk.

Between the fact that crypto will be the first to be sold and, in and of itself, could be the fuse that lights the next sell-off, it feels like a great time to remind my readers that just because ugly headlines aren’t splashed across CNBC, and it isn’t obvious that something is breaking, doesn’t mean that it isn’t happening in the background—or that a hole hasn’t already been blown in somebody’s balance sheet.

My goal as an investor and commentator is to always be thinking like a contrarian in a market, monetary system, and global economy that is dominated by herd mentality.

Bill Ackman’s proclamation that “Hell is coming” during the Covid panic wasn’t a cue to sell, it nearly marked the bottom. The lesson? Just remember: by the time you read about it in the news, it will be too late to react, and panic will have already hit the masses.

QTR’s Disclaimer: Please read my full legal disclaimer on my About page here. This post represents my opinions only. In addition, please understand I am an idiot and often get things wrong and lose money. I may own or transact in any names mentioned in this piece at any time without warning. Contributor posts and aggregated posts have been hand selected by me, have not been fact checked and are the opinions of their authors. They are either submitted to QTR by their author, reprinted under a Creative Commons license with my best effort to uphold what the license asks, or with the permission of the author.

This is not a recommendation to buy or sell any stocks or securities, just my opinions. I often lose money on positions I trade/invest in. I may add any name mentioned in this article and sell any name mentioned in this piece at any time, without further warning. None of this is a solicitation to buy or sell securities. I may or may not own names I write about and are watching. Sometimes I’m bullish without owning things, sometimes I’m bearish and do own things. Just assume my positions could be exactly the opposite of what you think they are just in case. If I’m long I could quickly be short and vice versa. I won’t update my positions. All positions can change immediately as soon as I publish this, with or without notice and at any point I can be long, short or neutral on any position. You are on your own. Do not make decisions based on my blog. I exist on the fringe. The publisher does not guarantee the accuracy or completeness of the information provided in this page. These are not the opinions of any of my employers, partners, or associates. I did my best to be honest about my disclosures but can’t guarantee I am right; I write these posts after a couple beers sometimes. I edit after my posts are published because I’m impatient and lazy, so if you see a typo, check back in a half hour. Also, I just straight up get shit wrong a lot. I mention it twice because it’s that important.