FOMO culture

 There was a notable bullish shift in sentiment the last couple of weeks as per fund flows and sentiment. We're also seeing a sizable spike in bond yields. I've said it here many times before that notable pullbacks/corrections have been preceded by a surge in bond yields like this.

One of the biggest newsworthy events of late is the revelation of Tesla having bought $1.5B worth of BTC while  other "whales" are joining the party or are strongly considering it despite probably not truly understanding BTC or what they are getting into.  Tesla, buy the way, effectively used debt to buy BTC given the bonds they issued in the past couple of years. Whether they want to admit it or not, this newfound institutional inflow into BTC is purely monkey see monkey do and FOMO behavior. They can try to rationalize it all they want, but that's what it is. It's no different than the retail meme stock mania. My theory has been that BTC is being driven purely by greater fool buying which can only be sustained by a steady inflow of new fools and now because of Tesla and others, institutional money flow is providing a fresh source of inflows to keep the BTC party going, There is also now a BTC ETF which will also suck in every last retail investor and momo trader who was always tempted to buy BTC but didn't know how or were afraid to. With the BTC ETF it's now easy to buy BTC.  A buddy of mine asked for help to set up a Questrade account so that he can buy $2500 of this ETF. Do you think he has a clue about what BTC is or how it works? Of course not. Just like the "GME to the moon" reddit "investors" had no clue or how Hertz "investors" had no clue what they doing last summer.

Given these recent developments we are fast approaching the all in scenario for BTC where the bubble will be ripe for bursting and this time for good because there will be no more greater fools to get in. As institutional flows pour into BTC, systematic risk from a BTC crash rises along with it.  I should look into this more because we all know what happened the last time there was widespread exposure of toxic assets held by so called smart money institutional investors (yes I'm talking about MBS in 2008).  

I've seen people including Tyler Winklevoss say "if you don't own BTC you are short BTC". What a fucking crock of shit statement. They are basically saying if you don't own BTC you're a loser. I quoted Cameron Winklevoss at the height of the GME mania tweeting "If you don't like the suits buy GME and AMC, if you don't like the bankers buy BTC".  Just shameless, baseless pumping from these clowns but because they are such "influencers" people blindly follow them. Same goes for Elon. Elon seems to be going off the rails lately. He's been pumping Dogecoin like a fiend - a crypto currency (if you want to use that word) which was created as a joke and now has market cap of over $7 Billion thanks to his pumping. Remember Elon was also pumping the "revolution" stocks.  

We've never had a time like this whereby people are willing to pile into just about anything  as either an expression of their opinions, or sheer  FOMO ignorance. Clever contrarians who bet against these moves too early only add fuel to the fire as they get ran over  while momentum type traders who are programed to chase strength add even more fuel to the fire.  But ultimately it ends in disaster once you run out of buyers and the fundamentals assert themselves. To me it's as clear as day that the true underlying driver of the BTC price is greater fool buying and that can only take you so far. Eventually reality hits and hits hard and fast. The ridiculous assent of  Hertz, Signal, GME, AMC, blockbuster and all the other junk stocks ultimately ended in disaster because the fundamentals said so. BTC will end the same way, but sure, it can keep going higher first as this newfound institutional love continues to pay out.  After resisting for so long, you're seeing a lot of advisors/market strategists capitulate and now say t's a good idea to add 5-10% of BTC to portfolios as an inflation hedge to replace gold. Even though these strategists still can't rationalize why the BTC is worth what it is, they've basically shrugged their shoulders and drank the koolaid. Have you noticed that gold has been in decline while pretty much every other commodity has been on the rise as of late? That's got to be mainly due to the BTC displacement effect. 

I will leave you with this consideration. Right now the Elon's, Winklevoss's and Cathy Wood's of  today are being worshiped but one thing I've learned over the years is that today's geniuses are often tomorrow's goats. It wasn't too long ago when permabears such as Roubini and Schiff where looked at as geniuses because they were big bears prior to the 2008 meltdown. Meredith Whitney was another name.  Remember her? She made a great bearish call on the banks.   But these folks remained bearish all throughout the bull market that followed and eventually turned out to be goats which I predicted would be case. Back in April 2009 I wrote this "A comment on analysts Whiteny and Roubini who have recently achieved super star status: From my experience anytime an analyst or strategist or whoever become market sages they inevitably will fall from grace usually shortly after the point when everyone worships their every word (we could be at that point already with these 2). These 2 will WITHOUT A DOUBT one day become goats. Mark my words.""

Abbey Joseph Cohen was the permabull star strategist for Goldman Sachs who gained notoriety in the 90's for her permabull outlooks. She reminds me a lot of Cathy Wood today. When the tech bubble burst in 2000 Cohen stayed bullish all throughout the bear market that followed and her star had fallen. So, beware of blindly following gurus just because they've had a hot hand. That's one of the things I've learned over many years. Along the same lines, what I've also learned is this: respect price action but don't defer to it. Just because the price of something is either rising or falling doesn't necessarily validate the respective bullish or bearish narrative that accompanies it. It's easy to be convinced by the bull case when price is rising and likewise in the bear case when price is declining. Always keep an objective perspective to the best of your ability and always remember the motto of this blog. Once everyone starts to worship someone or some particular narrative that's when you need to be on guard for things going in the opposite direction.