Are we allowed to talk about Bitcoin?

The futures (CME contract) got down to 7700 a little while ago, and have been dropping all morning (I am not trading them -- I have been riding the 30-year bond down for days, and the move has been stunning. ... which is a major cause of what is happening). Equities have finally shown weakness too -- the last few days, and more overnight.

It all has to do with bond yields, which have spiked and hit levels a lot of people were looking at (there has been a massive bond sell off -- stealthy for months, accelerating the last few days). Equities are finally waking up to it a little; "fear of missing" out created euphoria the last few months, but it's hard to ignore a spike in yields like this. All of the gains have been predicated on the "free money" and margin created by artificially low real rates (the central banks are so far behind the curve and have created ridiculously loose financial conditions which has made markets into a casino). Rates spiked just a little (and this is just a taste of what is going to eventually happen), and this is what happens. And bitcoin is the mother of all bubbles, so. ...

There is a magic number on yields, where all of the central bank created credit (trillions of dollars of phoniness) that has been close to 10 years in the making, ends with a credit crisis. ... and then lots of bubbles are going to pop, not just bitcoin. I don't know the level on yields, where you start seeing the defaults cascade and the margin calls pick up. ... but we'll find out.

It started to happen in 2015, equities started to sell off (yields were spiking then, too), and I thought they were going to finally have to face a deleveraging. ... but then the ECB and BOJ stepped right back in with more quantitative easing, expanded overall central bank balance sheets stunningly by trillions of dollars more by buying every piece of crap bond they could get their hands on. ... to keep rates suppressed and keep their bubbles from popping. And they sent risk assets into the stratosphere. I would have never guessed they'd be that dumb, but they were.

One of two things happens in the future. Rates are going to keep normalizing (maybe in a disorderly way, which will cause some staggering crashes in risk assets; if it is more orderly, it will be a slower bleed with fits and starts that seduces people to buy the dips). And bitcoin will go down a lot farther (and so will worldwide equities, commercial real estate, high yield bonds. ... and a lot of other assets that got ridiculously overvalued). Or the Federal Reserve will launch QE4 or the ECB will announce that they are upping the asset purchases (reversing course on their rhetoric -- part of what has spooked the fixed income markets causing the bond sell off), or the PBOC will intervene, etc. ... in the hopes of keeping the house of cards they all created in concert from crumbling and taking down their phony economies they have spent the last decade patting themselves on the back for. Much like what they did in 2015 when they panicked. ... and made the problem worse (and among other things, creating the bitcoin bubble), even if they bought time with all of the asset purchases to prop up the debt markets (and create even more frothiness in the process).

At a certain point, they won't be able to keep control (as happened in 2008), and sanity will reign again despite their panicked efforts to keep propping up a bigger and bigger credit mess. They took it way too far, created credit-induced messes all around us that make the last housing crisis look quaint, and as all powerful as the Fed, ECB, BOJ, PBOC, etc. supposedly are as grand manipulators, there is going to be a limit at which markets flat out ignore them because the debt and devaluation will have passed a threshold. ... and if they try to step back in as they did in 2008/2009 to reinflate their bubbles, they aren't going to be able to do it again perhaps, because markets won' go along this time. You can not create more and more debt and leverage at an escalating pace and keep monetizing it by expanding money supplies (which robs anyone trying to save). It a formula that has created disasters on small scales throughout history. What they have done over the last decade took it to insane places. And bitcoin may end up being the poster child for it (blockchain technology itself on the other hand may or may not have value in the future).

One thing. ... There is a jobs number in about 30 minutes. Things are so oversold / overbought right now on the volatility bond yields have created, that if the wage gains they report don't freak people out causing a further selloff (on inflation fears), you might get a relief rally to end the week, putting a temporary end to the carnage. And again, if central banks step right back in. ... maybe they can buy more time and inflate their bubbles a little further. This ultimately ends in disaster for a lot of things, not just bitcoin.