Author: admin

Where is bitcoin price heading?

There are many theories out there and one of them is to compare with the 2021-2022 bitcoin crash.

From Nov 2021 to Jan 2022, bitcoin price crashed ~50%

  • $68,789.63 (November 10, 2021)
  • $32,917.17 (January 24, 2022)

From Apr 2022 to Jun 2022, bitcoin price crashed ~63%

  • $47,313.48 (April 3, 2022)
  • $17,708.62 (June 18, 2022)

Things are not the same this time – back then Fed was entering a rate hike cycle, Russia-Ukraine war/conflict broke out, and LUNA crashed.

Let’s say this time things are less severe. Fed is not going to raise interest rate anytime soon, although it may shrink balance sheet, plus major wars may be ending.

From Oct 2025 to Nov 2025, bitcoin price crashed ~33%

  • $126,272.76 (October 6, 2025)
  • $84,209.42 (November 22, 2025)

Let’s call the scaling ~2/3 vs 2021-22.

Then the second crash should be down ~42%.

In Jan 2026, bitcoin price was around $97,860.

To crash 42%, it would be ~$56,759.

We saw recent low at $60,074 on Feb 6, which is ~5% from our calculation above.

See previous posts on bitcoin

Random action’s profound impact

A random thought while drying my hair –

Whether your hair (bangs) goes left or right is probably determined by which hand you use to hold the hairdryer in the first place / mostly of the time.

Actually, for me at least, I never change that choice of hand.

The more I use one hand, the easier to use that hand again. I feel awkward to use the other hand.

Thus that (always using the same hand) will pretty much determine how my hair parts.

China’s currency policy

It’s a very keen observation and description by Kenneth Rogoff in his book Our Dollar, Your Problem that China prioritizes a USD exchange-rate objective over domestic inflation targeting.

What are the implications?

1/ Tighter capital movement control

The “impossible trinity” says a country cannot simultaneously have a fixed (or tightly managed) exchange rate, free capital movement, and independent monetary policy.

Since China uses the peg and China wants more independent monetary policy (when Fed raised interest rate last cycle in 2022, China didn’t follow), it has to have tighter capital movement control.

Or PBOC policy shall move more in-line with US Fed policy.

2/ Real exchange rate moves

With a mostly fixed nominal RMB/USD, the real exchange rate moves via the inflation gap:

If China inflation below the US, China gets a real depreciation (more competitive) even without nominal RMB weakening. This is what happened in the last few years, and foreigners will find traveling in China very cheap (e.g. Chinese hotel price).

If China inflation above the US, China gets a real appreciation (less competitive) even if the nominal stays “stable.”

3/ Intervention can force money/credit swings 

Defending the exchange-rate path often requires buying/selling FX:

When inflows are strong, the central bank buys USD and creates RMB liquidity (which can be inflationary/credit-boosting).

When outflows dominate, defending the rate can drain RMB liquidity (which can be contractionary).

4/ It tends to bias the economy toward tradables and away from household consumption

If the RMB is held weaker than it otherwise would be (or just “less strong” than productivity would imply), it functions like:

a subsidy to exporters/tradable producers, and

a tax on importers/consumers (imports cost more in RMB terms than under a stronger currency).

5/ Bigger reserves and bigger balance-sheet exposure to USD assets

Exchange-rate management usually accumulates FX reserves (especially in surplus periods). That brings valuation risk when USD moves, opportunity cost (low-yield reserve assets vs domestic needs), geopolitical/financial exposure to the dollar system.

Big capex is not longer welcomed

US big tech continue to post higher capex outlook for 2026 and those figures are surprisingly large.

However, you now start to negative reactions.

1/ Their own stocks respond negatively

2/ Nvidia stock, which presumably is a beneficiary for higher capex, hasn’t responded very positively

#Why capex is less welcomed?

1/ It could just be higher inflation across the chain. higher price for infrastructure, power equipment and construction workers etc. Therefore, it’s a less-efficient use of money

2/ Investors don’t see immediate growth. The 2026 growth outlooks, which should be supercharged by already massive capex in 2025, is not impressive enough. Investors fear that marginal incremental growth coming from additional capex looks small, at least in the current year.

China’s missing inflation in early 2000s

In Our Dollar, Your Problem, author raised this question – why China didn’t see a faster inflation it should see. The higher inflation rationale is that when tradable goods sector productivity rises fast, this part of the economy will attract more workers, presumably from non-tradable goods sector. Thus, wage should rise and likely at a faster pace than the productivity gain in non-tradable goods sector, which should result in higher inflation in non-tradable goods sector to counter labor inflation.

In the books, the author mentioned one plausible explanation, which was Chinese gov could move massive population from rural areas to cities and factories. The amount of inflow was so large that wage increases were not seen. Thus, there is lower than expected service inflation.

This sounds reasonable.

I have additional arguments on #why China didn’t see strong inflation in non-tradable goods sector.

1/ The high-end of services are not priced fairly in China.

Unlike more capitalism-driven societies, the high-end supply and demand are exchanged in non-monetary channels. E.g. think about the high-end healthcare senior gov officials may receive in China – that’s not charged at the “market price”. Thus, you can’t measure the inflation, if that doesn’t carry a “price”.

In additional, the high-end services may not be available to the public or openly marketed. Thus demand is lower than it should be.

2/ High-end demand is shifted abroad.

Chinese wealthy like to shop, travel and live abroad.

This lowers the inflation across the board.

So they say central banks are buying gold

I did some research and tried to put pieces together.

1/ Central banks are buying, but top country is Poland (National Bank of Poland).

None of G7 is top buyers in 2025 till Nov.

German is a small buyer.

Source: IMF, respective central banks, World Gold Council

 

2/ The total buying from central banks surged in 2022

2022 vs 2021, more than doubled

2022 vs 2018, more than 50% surge

Year
Annual central bank net gold purchases, tonnes
2014 601.2
2015 579.6
2016 394.9
2017 378.6
2018 656.2
2019 605.4
2020 254.9
2021 450.1
2022 1080.0
2023 1050.8
2024 1089.4

Source: www.visualcapitalist.com

3/ Many gold buyers are Russia trading partners, except for Poland

Six of top seven central bank gold buyers in 2025 through Nov is a top Russia trading partner.

Poland (no)

Kazakhstan (yes)

Brazil (yes)

Azerbaijan (yes)

Turkey (yes)

China (yes)

Czech (yes)

Top Russia trading partners in 2024.

Source: oec.world

It looks possible that as Russia doesn’t want to accept or own USD, or it can’t use USD, its trading partners are buying gold as a form of payment.

 

Chatted with ChatGPT and created model for gold price

With a 5-year time frame, I tried to create a gold price model for 2028, based on 2023 gold price.

Gold_2028 (USD/oz)
– Low $4,087
– Base $6,070
– High $9,556

gold_2028_model_with_deficit_cb

Disclaimer: I am not expert on gold nor did I have spent considerable time in studying it. But I was trying to understand different drivers behind gold price. I asked ChatGPT to pick the coefficients, so there is little credibility behind these coefficients.

 

Notes of Paul Tudor Jones (PTJ) on AI bubbles

Paul Tudor Jones on the AI Bubble Debate by Bloomberg

The only way to reduce debt to GDP is to have obviously nominal growth exceed your interest rate.

– Paul Tudor Jones

Here are notes for Paul’s interview and my opinions

  • Today feels like Oct 1999, but if this is a bubble, it’s a small one. Past bubbles ran 400–600%. Nasdaq is “only” ~200% off the bottom. Blow-off possible, not inevitable. [I agree; see my previous post Is it like internet bubble? in October]
  • Key bull case: rates. If Fed funds fall toward ~2.25–2.75%, that’s powerful fuel for equities. Markets look 6–9 months ahead, not at today’s data. [Sure]
  • Difference vs 1999: companies are profitable. [I don’t agree; I believe AI model companies like OpenAI etc. are losing a lot of money; let’s see when they publish numbers for IPOs]
  • Risk isn’t traditional leverage like in margin accounts — it’s derivative leverage: options, leveraged ETFs (up 250% from 2022 bottom), and trader-driven equity flows. [Very real]
  • Jones stays a trend follower. Recently, gold & silver > Bitcoin despite massive crypto inflows. He now expects precious metals to outperform crypto into year-end. [I wouldn’t agree back then; but I would be very wrong, so far]
  • Bond vigilantes were held in back; money debasement happened in gold and bitcoin instead. [True]
  • Biggest risk: concentration everywhere — stocks, investors, and policy power. [Agree]
  • Bottom line: short-term cautious, but Paul believes markets can be substantially higher by year-end. Likely long: Nasdaq. Short: Bonds.