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Thoughts, Insights, and Market Commentary

2019 Market Update 008 - July in Review

Major Market News: 

The bottomline: 

There is an old saying by Gandhi. It goes: "First they ignore you, then they laugh at you, then they fight you, then you win." 

Up until 2013 Bitcoin was ignored. 

Up until 2017 Bitcoin was laughed out of any room.

Now the fight has begun. Two years ago it was unimaginable that Bitcoin would take center stage in politics, with the house, senate, treasury, federal reserve, and even US president commenting on digital currencies within the span of 30 days. We have hit a tipping point, and it is fair to say there is no going back now. The Bitcoin train has left the station, and while it is riding down a bumpy road there is really just one destination. Our past predictions of interest cuts, inverted yield curves, and a 2019 macro reversal all have come true. The biggest years for Bitcoin may be right ahead of us. We look forward to sharing our first in-depth multi-page bitcoin research report with you the coming weeks. 


Our Past Predictions


Prediction from Market Update 006 & 007 "The global macro-economic backdrop is supportive of this as well as central banks are pushing off the next coming recession by artificially lowering interest rates to the extent that the IMF is considering negative interest rates. An economic environment where the bank charges you money to keep your savings, is one that we find extremely supportive of a crypto future." "The Federal Reserve Futures show a 100% chance of at least one interest rate cut in July. Lower interest rates are not just on the horizon, they are impending." "Bitcoin has found halt 40% from the all-time high several times before (see graphic circled in green). Usually we see Bitcoin price action take a pause here for as much as 180 days. But as mentioned previously this market cycle is decidedly faster than any of the previous cycles, so a sideways move in the $8,000 to $14,000 range may be completed in little more than 60-90 days, before continuing it's rally to break the all time high."

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Result: The Fed, as predicted for two months now, has officially cut interest rates for the first time in 10+ years. There are very few more bullish monetary policy decisions for Bitcoin than the cutting of interest rates. Bitcoin has also continued trending sideways between 8k and 14k as predicted last month.    

Technical Short Term and Fundamental Macro Economic Prognostic: 

Short Term (2019): 

From #007: 'Bitcoin has found halt 40% from the all-time high several times before (see graphic circled in green). Usually we see Bitcoin price action take a pause here for as much as 180 days. But as mentioned previously this market cycle is decidedly faster than any of the previous cycles, so a sideways move in the $8,000 to $14,000 range may be completed in little more than 60-90 days, before continuing it's rally to break the all time high. As Bitcoin's volatility fizzles, we expect a lot of money to get bored and seek faster and bigger returns in alt coins that have not yet experienced the type of rally Bitcoin has. Some of these assets stand to gain 100%+ returns simply to catch up to their November 2018 levels. We believe that should there be an altcoin "season" it is likely imminent, as they tend to coincide with post-Bitcoin rally cool-off periods. This is quite logical as investors take profits off their Bitcoin trades and cycle them into what they think might be next.'

#008 Addendum: The moving averages have quickly accelerated. The 100 Day Moving Average (yellow line below) has now progressed to $8850. This moving average has historically only been broken 2-14% of all days in all past bull markets. The 200 Day Moving Average (red line below) has now progressed to $6450. This moving average has historically only been broken 0-1% of all days in all past bull markets. It stands to reason, that the bottom of this pull back is already in, or will most likely be completed with a re-test of the 100-MA. A 200-MA pullback of course is possibly, though statistically highly improbable. We also project the 200MA proceeding to around $7500 by September 1st, leaving the $6000's behind for good. 

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Additionally we noticed that the in past bull runs we never closed below the 20 Weekly MA (green line below), and never even touched the 100 Weekly MA (yellow line below) in a bull run. This puts even more support in the low 8000's and high 7000's.

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The one caveat we will address in our extensive research report is that we are significantly ahead of schedule with bitcoin's price action as we have historically not broken an all-time high before a halving, which at this point is still 10 months away. That said we only have 2 data points thus far, which is not significant enough to overshadow the momentum with which bitcoin has started the year. Either way our strategy is prepared to take advantage of an extended side-ways move. 

In the world of alt-coins, we noticed a similar divergence at the beginning of the last Bull Run in 2016. You will notice in Q4 2015, alt-coins were lagging Bitcoin for several months, declining while Bitcoin rallied. 

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So while many alt-coin holders are capitulating, we remain steadfast.

Alt coins have a history of lagging bitcoin, but they also have a history of severely outperforming bitcoin when the time comes. In the same timespan in 2016-2017, Bitcoin grew by 3,500% when alt-coins on average grew over 95,000%. These are the types of returns we are comfortable both accepting risk and staying patient for.

The outcome is rather binary in terms of alt-coins in a crypto upside scenario:

1. Alt coins go to 0 and Bitcoin proceeds to hit its target of 200k. With our current allocation we'd still more than 10x our holdings in this scenario.

2. Alt coins grow just 10% of what they did in the 2016-2017 cycle and our holdings would appreciate north of 50x.

Either way we are ensuring that we are ready for either scenario. We are no longer diluting either allocation down, by siphoning Bitcoin into more alt coin purchases, nor vice versa, but are trading each allocation separately to grow it from within. (e.g. trading alt-coins against alt coins to grow alt coin holdings, and day trading BTC against USD with small margin positions)


Long Term (2020-2022)

After in-depth valuation method cross-referencing, we have fine tuned our long term projections. We expect a bitcoin top at around $200,000 between June 2021 and April 2022. This analysis took into account bitcoin supply halvings, miner capitulations, active wallet and user trends, stock to flow scarcity calculations, recession projections, and bitcoin market cycle structures. The full break down will be presented within the coming weeks via a multi-page report. It stands to stress that the road till then will be bumpy, something we aim to take advantage of. Anyone who can commit to remaining allocated in this market from 2019-2022 is likely going to reap massive rewards. We will do all we can to produce the best returns over this time span, while responsibly playing the long game. 

From #006: 'The global macro-economic backdrop is supportive of this as well as central banks are pushing off the next coming recession by artificially lowering interest rates to the extent that the IMF is considering negative interest rates. An economic environment where the bank charges you money to keep your savings, is one that we find extremely supportive of a crypto future. Sprinkle in Trumps plans for new Quantitative Easing (also known as printing more Dollars), and combine it with a Bitcoin halving which makes Bitcoin more scarce than Gold, we are looking at the perfect storm for digital asset appreciation'

#007 Addendum: 'Lower interest rates are not just on the horizon, they are impending. Furthermore President Trump went public in a tweet this week writing “China and Europe playing big currency manipulation game and pumping money into their system in order to compete with USA. We should MATCH, or continue being the dummies who sit back and politely watch as other countries continue to play their games - as they have for many years!” It's safe to say the President is comfortable running the printing press to achieve his foreign policy agenda. A concerning measure for anyone with USD savings, and a tweet to be celebrated by anyone who is long Bitcoin or other safe-haven assets. Bitcoin may just be the ultimate hedge during the coming economic recession.' 

These positions will of course adapt over time, but they are based on taking a deeper look into similar market cycles, asset classes, and macro economics.  

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