Gareth Soloway: China’s Bank Run Helps Bitcoin

Gareth Soloway: China’s Bank Run Helps Bitcoin

‘I don’t know how much the public will see it, but I do think that banks like JP Morgan, Citigroup, and Goldman Sachs are all taking note, and they’re probably going back to the drawing board and looking and saying, ‘Okay, do we need to protect ourselves? How do we kind of plug any holes?’ And let’s keep a really close eye, you know, keep scanning for any of these breakages in the system.’ – Gareth Soloway.  

More political and financial turmoil hit the world news as bank runs in China caused an uproar. While bank runs and failing institutions are nothing new when it comes from a major financial powerhouse like China, it appears to have hit close to home. Many faithful depositors have demanded their money amidst financial instability in four rural banks in China’s central Henan province.

As reported by CNN since April, four rural banks in China’s central Henan province have frozen millions of dollars’ worth of deposits, threatening the livelihoods of hundreds of thousands of customers in an economy already battered by draconian coded lockdowns.

Of course, many bitcoin enthusiasts saw this as an opportunity to reinforce the importance of decentralization and securing your own money.

As a guest on the Pall Baron Network, trader and analyst Gareth Soloway discussed the effects of the bank run and general economic sentiment on bitcoin. Although bitcoin won’t see an effect in the short term from this collapse, Soloway believes it will bring awareness to the flagship cryptocurrency as more and more people will look for alternative ways to secure their financial future.

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‘While things like this may not immediately impact bitcoin, I do believe that the more instability globally, especially in the banking system, the more it pushes people to accept an alternative currency, something like bitcoin.

I mean, just think about all these people that are being affected in China and aren’t able to get their money out of the banks. Consider this: some of them may have never heard of bitcoin before, or may have heard of it only briefly, and now they’re saying ‘Listen, how do I avoid this in the future? Let me invest some of my money in bitcoin.’

So this is one of those things where, in the short term, I don’t think it has a major impact on bitcoin. We’re not seeing bitcoin rip higher today, but it’s just these little pinpricks in the financial system that are the building blocks for bitcoin.

And listen, let’s be clear on this. I mean, we are in a new era, at least in recent history, where the Fed is now. The markets don’t even believe it yet that the Fed won’t be able to come rescue us again. They’re still in that kind of fantasy land, and so the economy is still kind of trudging along. Everything will be okay, you know, and just think about this. If the Fed can’t rescue us, or let’s say they can only do minimal support because of inflation being elevated, and yes, I’ve been talking about CPI numbers coming down, but let’s not kid ourselves, they’re not going back to two percent or sub two percent, I mean, they’ll probably stabilize it at four to five percent. How do you print trillions and trillions of dollars when you already have a four to five percent handle even with unemployment spiking to let’s say 10? You can’t.

How does the Fed rescue us going forward? They have a dual mandate, but what happens when you have high unemployment and high inflation, or at least 5% inflation? What did you end up doing? Where is the silver bullet erupting from that gun? I don’t know.

This is the one caveat here: I frequently believe that the Fed has pushed forward an enormous amount of upside in the markets over the last decade or so through stimulus and simply printing money. It’s almost like you have to now have an under trend period where you could see I could be surprised if the stock market doesn’t reach new all-time highs for like 10 years. I mean, you could be in this kind of lower situation just like in the tech bubble, right?

If you look back at the tech bubble, the Nasdaq didn’t hit new all-time highs until I think 2014 or 2015. People just need to remember that there’s always a bull market somewhere. Even if I’m bearish on the overall stock market over the next year, two, or many years, there are always areas to look for, whether it’s gold, cryptocurrency when it finally bottoms out, or the Asian market. You just don’t know, but my goal is to let people know that there’s no reason to despair. You just have to do a little bit more homework to find out where that bull market is despite any economic conditions.’

Gareth wants to stress that there is always an opportunity to make money. He went on to explain his current setup and how he is positioning himself for long-term investment and short-term trade. As Gareth explains,

“If we look at the chart here, you can see that basically where it stopped was kind of these little pivot points right here and right here, so it makes sense that price was going to hit some resistance there. I think another under-discounted factor of bitcoin is the US dollar, and the US dollar screaming higher certainly doesn’t help.

Gareth Soloway China's Bank Run Helps Bitcoin graphics

How much it hurts is up in the air, but it certainly isn’t like a helpful hand in lifting bitcoin up. I think if the dollar is topping like I’m thinking in the next couple weeks and we see the dollar start to come down, that could be the catalyst for a move up and a break above this near-term $21,800 – $22,000 level where we do get that move up to this 20.25 level. You’re absolutely right from last week when we talked. I was looking for potential upside to $25,500. I think we are a little higher than we were last week when we talked, but I think for the most part, you’re just hovering in this wedge pattern. Look for a break here, and then you should get that move up to $25,500.

I will say if we break the lower trend line, that would start to be concerning for me. Then you have to start looking for a retest of $17,500 down here. But right now, this little range here, it’s getting tighter and tighter. I would say within the next five days, we’ve got to assume bitcoin will get squeezed out one way or the other, either a breakout or a breakdown. My analysis shows my probabilities are still favoring the upside to $25,000.

I have two kinds of trades going. One is a swing trade where I’m just trying to play the breakout and I’ll be looking to take profits at $25,500 and then maybe the next resistance, the rest of it off the table. What you’re referring to, Paul, is where I’m looking to accumulate for a longer investment strategy or a longer position. Basically, what I’m doing is using the technicals coupled with kind of the fear index. I love seeing this kind of massive fear and panic in the bitcoin market because it usually denotes at least a short-term low and then, looking at the chart, it’s about where the technical levels are telling us it’s going to go.

So if we flip over to the chart here, the reason I bought my first one, which was at $19,000, was just simply that it was now we had just pierced the 2017 high right here, which was around $19,500, so I picked up just one-sixth of what I wanted to own or what I planned to accumulate.

Gareth Soloway: China's Bank Run Helps Bitcoin chart

I strongly encourage this tactic because, ultimately, it saves people a lot of stress. When you go all in at a particular level, it seems very painful when it just drops another few thousand dollars or whatever and you might get swung out. One of the keys to investing is to not allow emotion to influence the decision. Every decision you make as an investor or trader should be based on facts, chart facts, whatever it may be, on chain analysis and not emotion.

So what I do is I’m very cognizant of the fact that when I first buy, the odds of that being the exact low are very low, so I picked up my first buy at $19,000. I’ll basically buy every two to three thousand down, which will let me buy all the way down to sub $10,000 if it gets there. I don’t know if it will get there, but I always like to add on the side of caution. I’d rather own less bitcoin and have been cautious and protective of my capital than own it all and risk being out of money and having to stop myself from withdrawing.

The idea here is that every $2-3 thousand down I’m just going to buy another one-sixth position, allowing me to have a total of six total positions that I accumulate, and then my goal here is to see bitcoin longer term at 200, 300, 500, even a million dollars, and that’s where I plan to hold that position.’

What do you think of Garrett’s thoughts here? Do you think the bank run in China will have a long-term effect on bitcoin?

 [This article is a transcription of a video made by Only The SAVVY]

[Original video:]