In the last month I’ve been talking about the growing and now most likely Dark Window scenario for stocks, given that we haven’t seen that infamous 40% crash in the first-three-months scenario that finally declares a bubble is over.
That is, we could see a final blow-off rally for stocks that could take the Nasdaq up to as high as 10,000 and the Dow to possibly 33,000!
It’s typical that stocks see a final blow-off rally before a catastrophic crash: like the super 282% rally from late 1998 to early 2000 in the Nasdaq before a 2.5-year 78% crash. The tech bubble produced the most extreme Dark Window.
The Internet Index was the late-stage and most extreme bubble, surging a whopping 489% in that Dark Window for the Nasdaq into 2000.
Bitcoin (and cryptocurrencies) has been surging from $1,350 in April to $19,872 in December 2017; 1,368% in 8 months!
It not only outdid the Nasdaq and internet late-stage bubbles, but even the infamous Tulip Bubble of 1637.
However, bitcoin isn’t a part of the Nasdaq and can’t goose it up like the internet did in 1999.
And most people assume the bitcoin bubble is over after it crashed to $3,200, losing a full 84% from its high.
But my friend Michael Terpin (who has spoken at our Irrational Economic Summit two years running now) keeps reminding investors how many times bitcoin has “died” and then ascended back to heaven.
When I look at the bitcoin chart, it shows me such a scenario is possible for the beaten down crypto…
I’m looking at this as a possible 5-wave pattern, with us having seen the mighty 3rd wave in late 2017 – all of this in the early “hype phase” of blockchain technologies.
The internet saw that hype phase bubble peak in February 2000. Then it crashed 93%. After that, it saw a 16-year major bull market into now (and it’ll likely extend to 17 years in 2019).
Investors always greatly overestimate new technologies in their early stages and greatly underestimate them over the longer term.
The internet became the “next big thing,” as very likely will blockchain technologies. I see it as internet 2.0, which will peak in a long-term bull market around 2036/37 on an 18 to 19-year lag to the internet. It will also coincide with the peak of the next global stock boom, by my demographic Generational Spending Wave cycle.
Note that the first wave, which was similar in percentage gains to the 2017 wave, saw an 87% crash after a high of $1,242 on November 29, 2013 into a January 14, 2015 low of $157 (it briefly saw an extreme intraday low of $92 on the first crash into early 2014).
It’s already been down 84% to $3,170 recently. If it went down a similar 87% again just over a year after its grand peak, that would suggest it could go as low as $2,600.
The important point is that it NOT break below that $1,242 Wave 1 high in 2013 to keep this 5-wave scenario as a possibility.
Given that the internet bubbled to extremes into the final stage of the last tech bubble, it would be a slam dunk that bitcoin sees one more dramatic bubble if stocks see that final blow-off into late 2019/early 2020.
Bitcoin $21,000 would be the minimum target, a slight new high.
But it would likely blow much higher than that.
I’m just putting out $30,000 as a rough guess. I would be looking to the more predictable Nasdaq, where targets are clearer around $9,400 to $10,100.
I would want to sell bitcoin about a month before it looks like stocks are about to hit a peak, as bitcoin peaked just over one month before the Nasdaq did in late January 2018. Incidentally, so did the internet before the Nasdaq in early 2000…
Then it would crash 90%-plus before its longer-term rally sets in.
If this greatly unexpected event happens, don’t say I didn’t warn you.