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Bitcoin Up? Answer: The Dow Jones/ Bitcoin Spread Theory

Posted by Dan Weiskopf, ETF Professor on Aug 10, 2022 10:30:00 AM
Dan Weiskopf, ETF Professor
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Bitcoin Up? Answer: The Dow Jones/ Bitcoin Spread Theory
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Market optimism shines bright these days. Some, like CEO of Astoria Portfolio Advisors John Davi, are even declaring that recession fears were overstated and that the Bear Market of 2022 is over. Also check out the Dow Jones Index! Now the question is also whether “winter” will now become “spring” in the Crypto Markets. Chart technicians will point out that the 50-day moving average held up well for the Dow Jones (31,711) and now the 100-day avg (32,803) looks to be gaining momentum. Based upon the Dow Jones/ Bitcoin Spread reaching a historic wide margin and the signal turning green, Bitcoin optimists (maximalists) might then, of course, call for a rally for their asset class to head for 33,966 (the 200-Day Dow Jones Moving Avg). Great to hear the bulls are back! Which billionaire passionately said “going to the moon”? Rocket Ships have been built by Elon Musk, Jeff Bezos and my favorite, Richard Branson. But to be honest…the bullishness has not always been consistent! At least, not for Bitcoin!

Wait? Who cares about the famous Dow Jones Index of 30 stocks? Isn’t it a narrow group of stocks?

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Who cares you ask? How about the folks who promote the “Dow Jones/ Bitcoin” Spread Index (Using Bloomberg, the INDU in gold is the Down Jones Index and XBTUSD in White is Bitcoin Spot). Look closely at the chart above. When the Dow Jones bottoms, the spread in price between these two markets inevitably narrows, as shown in green. This has historically been followed by Bitcoin price accelerating. Ultimately, should these two markets trade in parity to illustrate market liquidity soaking up demand? The “model” or thesis is predicated by overall market optimism and the “fact” that 82.5% of the companies in the Dow Jones have Crypto/Blockchain projects on their strategy board. All this, of course, reflects adoption by some major companies, and the utility value of Web 3.0. To name a few key companies: American Express, Apple, Cisco, Honeywell, Intel, IBM, McDonalds, Microsoft, Visa, Walt Disney, Walmart, Salesforce, Nike and yes – even Goldman Sachs. Don’t believe us? Check out the helpful links below!

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Based upon hundreds of thousands of hours of research, we can say with confidence that the spread is widest when the value is “the most wide.” Check out our whitepaper. Due to the fact that the Dow Jones closed at $32,800, Bitcoin closed at $23,803, the spread is near an all-time wide margin and in green, buyers of Crypto should come pouring in. After all, in the Metaverse, so many companies are reaping rewards. Why would the index that was established in 1896 not be the indicator for the Bitcoin bounce?

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Still not convinced? Well, in the whitepaper we constructed, which includes back testing dating back to 1896 when the Dow Jones was originally created, we outline how it all would work. Of course, that had flaws, so hopefully you will just believe us with the Bloomberg chart (See above) that goes back to 2010. Unfortunately, Bloomberg has some limitation with this analysis. Despite these limitations, clearly you can see that if you bought Bitcoin when it was in green, you made money! Proof enough? Need I say more? Still skeptical? Check out the work completed in 2018 from Cryptopas.

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What does this mean? Wait? WAIT! WAIT!!!!!!!

Is the “winter” or Bear Market over?

No, don’t go shorting the Dow Jones Index against your Bitcoin! No, in truth, we are poking fun on the reality that there has been way too much curve fitting by too many smart people in our business hoping to justify their analysis and investment positions. The two markets have nothing to do with each other in terms of signals, and curve fitting with words is just silly. We agree that these 30 large companies’ support of blockchain and, to a lesser degree, crypto would actually not make a trend anyhow. Nevertheless, the links are real and meant to be read. Hope our readers are not mad that we have not gone mad. We are realistic ETF Nerds in the ETF Think Tank.

Okay, we had some fun here with some ridiculousness. YES, TO BE CLEAR, THIS HAS BEEN A PARODY TO OUR READERS!!! Hope Cryptopas doesn’t get angry at us. We realize the link does not work.

Apology to our Readers

Bitcoin and the Dow Jones Index have nothing to do with each other, except $32,800 on Bitcoin would feel good for some of our readers. Arguably, the only point of all this is that the blockchain and thus crypto is ubiquitously embedded in corporate America. Arguably, the enterprises that embrace it as a competitive advantage are seeking a non-traditional strategy to grow their business or reduce their operating costs. Similarly, those that ignore it run the risk of having a Kodak or Blockbuster moment. Kodak was in the Dow Jones Index for 74 years, but was removed from the index in 2004. Blockbuster never qualified for the Dow Jones exclusive 30 Club, but instead sadly went bankrupt as Netflix took over its market. We sincerely apologize to our readers who may have been frustrated by the use of their time. Having said that – way too often we find that “investment strategists” rationalize the outcomes of conditions in the markets as if they knew or will know the future. Truth is, a long-term investment process and discipline trumps theory. Lastly, we are believers of Bitcoin, the utility value of crypto in general, and most importantly, the blockchain. Clearly, so is American business.

Riddle me a funny: Send us an email if you know how many years were between the creation of Bitcoin and the creation of the Down Jones!

Hint: January 3, 2009 to May 26, 1896

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