Wednesday, October 16, 2024

Bitcoin: the canary in the coal mine?

This might be the signal of a REAL crisis in the markets
 
   
     
   
 
OCTOBER 16, 2024
   

Hey y’all,

You probably know the phrase “a canary in a coal mine” … but do you know where it comes from?

It’s kind of dark… but here goes…

Back in the early days of coal mining, they understood that some mines contained toxic gas (primarily carbon monoxide) that could kill unaware miners, but they didn’t have scientific methods to detect it yet.

So they used canaries.

Canaries, as it turns out, are more sensitive than miners to carbon monoxide, so if they were released deeper into the mine and stopped singing, the miners knew to get out of Dodge (which is another expression from the Old West, but we won’t get into that one right now…)
 
 
Today, we use the phrase “canary in a coal mine” to basically mean the first warning sign that danger is coming.

And we use it a lot when we talk about the markets, to refer to what could be the first real indicator of trouble if things were to go haywire.

Well, yesterday, I was on with Nate Tucci talking about his phenomenal Automated Options strategy, and while we were debriefing about the markets, he shared something interesting that I wanted to pass along to you.

Now, Nate is a strong bull, and he really doesn’t think we’ll see a correction until at least after the election, and maybe even beyond the election and into Q1 2025.

But he gave worried investors one clear warning sign to look out for that could signal a serious correction: Bitcoin.

Now, you might be a little bit taken aback. After all, if Bitcoin is a “dollar hedge,” shouldn’t it theoretically get stronger when the economy gets weaker?

Well, maybe over time… but initially, Nate says that we should expect a sharper correction in Bitcoin ahead of, or at least simultaneous with, any deep correction in the stock market.

Why? Because Bitcoin is one of the most speculative investments out there, and people will jump out of those positions before they dump anything else.

Think of it like this: if you’re on a boat that’s carrying too much weight and sinking, what are you going to throw overboard first to try and save yourself: your priceless family jewels that weigh a few ounces, or a big, heavy box that might contain treasure or might contain nothing at all.
 
 
You’re always going to get rid of the “mystery box” first, and Bitcoin is still a “mystery box” in most traders' minds.

So, if we have a bad day in the markets, look at Bitcoin.

Yesterday, the markets corrected a little, and Bitcoin moved slightly lower, too. But it was a moderate selloff (and it’s already back up around $700 today, by the way).

Nate says that if we have a selloff that we really need to worry about, we’ll see a much sharper correction in Bitcoin early, which could be the warning sign that this is the “real deal” and not just a short-term repricing.

It’s an interesting perspective and something I’ll be watching any time the markets get a little sour. So I thought I’d pass it along to you.

To your prosperity,

Stephen Ground
Editor-in-Chief, ProsperityPub

P.S.: Jack Carter has boiled down his 40 years of trading experience into a state-of-the-art breakthrough designed to help pick trades FOR YOU. Check it out here
 
   
 
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