We want to quickly touch on our favorite Ponzi Scheme.
When a Ponzi makes a new all time high, you want to buy it. However, you need to be careful as it may be a trap. Look at the red circle, that was a trap. It sucked in the last few baggies on the highs, then melted away.
A few weeks back, we warned that the current new high may also be a similar trap.
Since then, bitcoin has consolidated and confounded everyone.
On one hand, we cannot deny the persistent inflows into ETFs (chart above from Farside Investors).
Which admittedly seem like the inverse of short interest in the futures as hedge funds play the ~50bps positive contango over SOFR. The fact that the contango remains this persistent is then driving inflows?? Or did the chicken come before the egg here?? All we know is that inflows are bullish, as the cash market gets cornered.
In any case, without going too far down the rabbit hole of Bitcoin, we just want to point out that if the move to a new high in March were a trap, we’d have likely reversed lower by now. Instead, we keep consolidating at new highs. Don’t hate us, but we’re increasingly of the view that Bitcoin will break out to new highs, in which case, you have a VERY visible and inflating Ponzi Scheme at new highs. You boys know what to do with that…??? Right…??