U.S. Dollar Shortage Caused Bitcoin to Crash, Says CIO Travis Kling

Journalist:
Kiril Nikolaev @kirilnikk123
September 27, 2019

Travis Kling is the founder and chief investment officer of crypto asset management firm Ikigai.

He recently went on air on CNN and gave the best description of what bitcoin is. In the interview, Mr. Kling said,

Bitcoin is a non-sovereign, hard-capped supply, global, immutable, decentralized, digital store of value.

The on-point definition made Kling an instant celebrity in the Crypto Twitter community.

Now, the crypto asset management firm CIO has dropped another bombshell. In a recent tweet, Mr. Kling suggested that a bulging problem known as the “dollar shortage” may have caused the recent bitcoin breakdown.

The Number One Cryptocurrency Did Not Plummet Due to Market Manipulation

When the top cryptocurrency plunges, retail investors are quick to point to market manipulation as the primary driver of the drop. There’s even an existing theory that the cryptocurrency often slides when the expiration of the CME futures contracts approaches.

However, the volume on September 24th, when bitcoin breached the $9,000 support, rivals the volume on November 14, 2018, when the cryptocurrency took out the $6,000 support. This is an indication that big players are exiting the market.

Volume similarities between the $6,000 breakdown and the recent drop point to a bigger issue than manipulation. | Source: TradingView

Kling believes that smart money investors are selling risky and volatile assets in favor of the U.S. dollar. That’s because global markets are experiencing liquidity issues or in other words, a shortage of cash in the system. According to Ikigai’s CIO, the surging repo market rates last week was a clear signal of this problem.

Travis Kling sees a correlation between funding problems and the bitcoin breakdown | Source: Twitter

What Caused the Dollar Shortage and How Does It Affect Bitcoin?

It appears that the dollar scarcity has been caused by two factors.

First, Reuters reported that the Federal Reserve has significantly reduced its portfolio of bonds in the last two years. The sale of government bonds helped push bank reserves down to $1.47 trillion, the lowest since 2011.

The second reason is that the U.S. government suspended the debt ceiling. This allowed the U.S. Treasury Department to borrow $433 billion in July and another $381 billion in October. The borrowing will further suck liquidity out of the banking system and exacerbate the dollar dearth.

U.S. Treasury aggressively rebuilding cash balance to help liquidity. | Source: SpeculatorAnonymous

How does this affect bitcoin? According to Kling, the bitcoin dump is merely collateral damage of the cash grab.

Bitcoin is still susceptible to global macro factors | Source: Twitter

Wyckoff Analyst: ‘Bitcoin is Experiencing a Terminal Shakeout’

Some believe that you don’t have to look beyond the bitcoin chart to know what exactly is happening. In an exclusive interview with CCN, Todd Butterfield, the owner of the Wyckoff Stock Market Institute, shared his thoughts on the recent bitcoin dump. The Wyckoff wizard said,

My opinion is that Bitcoin is experiencing a ‘Terminal Shakeout.’ This phenomenon occurs at the end of an Accumulation Phase. It is a sharp downward thrust thru a previous support area. It is executed for the purpose of buying up Bitcoin from the weak and vulnerable holders. It is then followed by an attempt to begin the markup phase of the cycle.

If Mr. Butterfield is correct, we should see bitcoin stabilize soon and then resume its uptrend. On the other hand, if Kling’s dollar shortage read is correct, then we would likely see the king of cryptocurrencies drop to even lower levels in the coming weeks.

There’s a lot of fear, uncertainty and doubt in the bitcoin and crypto market. Times like this test the hand of the HODLers.

Last modified (UTC): September 27, 2019 13:27

Kiril Nikolaev @kirilnikk123

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has a bachelor's degree with a specialty in finance and lives in Canada. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. He owns Bitcoin, Ethereum, and other cryptocurrencies. He holds investment positions in the coins but does not engage in short-term or day-trading. Follow the author on Twitter @kirilnikk kirilnikk123@gmail.com