bridge21 weekly update
A rant about ham-fisted governments — USD:MXN rates move sideways — BTC dips to 30k USD levels
Short-term USD:MXN forecast
The USD:MXN rate climbed above 20:1 levels mid-week before retreating. Trading started afternoon Sunday US time, and rates climbed above 20:1 again, before diving to 19.9:1 levels this morning as of this writing.
Various economist and bankers banged their drums last week claiming higher than expected inflation would hit Mexico. The reality is most governments overprinted their currencies and overreacted to COVID with lockdowns of entire populations when most people of working age or younger were not in dire risk from the virus, and despite knowing that natural immunity was quite robust. With rare exceptions like India, most ignored cheap and surprisingly effective OTC therapeutics like Ivermectin, favoring expensive pharmaceuticals promoted by their biggest lobbyists, the pharmaceutical industry.
The result of the past year-and-a-half will be (and already is) competing currency devaluations, even in countries that did not overreact, because they must keep their currency exchange rates relatively stable against countries that did. The ratio of currency pairs is likely to remain relatively stable, but purchasing power will race to the bottom across all currencies. Savings in national currencies will be decimated. Any “gains” in the stock markets will likely be losses in terms of purchasing power. Small businesses and the middle class will take the brunt of the blowback. Retirees on fixed incomes may fare the worst. They would be wise to diversify their savings out of national currencies and bonds with fixed rate returns in these currencies over the coming years.
We remain neutral to mildly bullish for the USD:MXN exchange rate over the short-term. We’re quite bearish on the short-and-long-term purchasing power of both currencies.
Bitcoin falls this morning and teeters above 30k USD
Bitcoin had a down week, with a sharp drop this morning. As of this writing, it’s hovering in the 30k to 31k USD range.
Last week we wrote “over the longer-term, we think the chances of breaking below 30k USD and testing 20k USD levels is more likely than breaking to new all-time highs above 64k USD.” We also called out a pennant formation in the charts.
We could see a break-out to the upside or downside early this week. We think a break-out to the downside is more likely. If it breaks the previous lows in the 29k USD range, we could easily test 20k USD. Alternative cryptocurrencies will follow Bitcoin.
The lows are happening faster than we anticipated. This could be an accelerated bear market with a faster than usual flip into the next bull cycle. If we break down to new lows and breakdown below 20k sooner than expected, an abbreviated bear market becomes more likely. We might not have to wait a year for buying opportunities!
Alternatively, we could rally back above 30k USD and endure a prolonged sideways market. Our preference would be to rip the bandaid off, but the market could care less.
Longer-term USD:MXN rate forecast
Our long-term forecast is still higher for the USD:MXN exchange rate through 2021.
Best regards,
Will -bridge21
The content in this update is for informational purposes only. You should not construe any information or other material in this update as legal, tax, investment, financial, or other advice. While we took care to share correct information from reputable sources, bridge21 cannot guarantee the accuracy or timeliness of the information.
