The Current Market Landscape
The current market landscape is volatile, to say the least, hectic to say the worst. With explosive new asset classes such as SPACs and Cryptocurrencies taking the market by storm, as well as individual securities such as Gamestop and AMC, seeing their share price skyrocket, it's been difficult for any investor to find a place of stability in the markets.
Even still, some investors find themselves wishing they had capitalized off of the volatile market environment during the height of its activity. They wish they'd ridden the crypto hype to the moon where they belong; and as such, they're asking what could be next? This was made to address this question and hopefully provide a clear-cut answer.
The Emergence of Copper
Enter Copper, the commodity that many experts are saying will be the next Bitcoin with regards to volatile, skyrocketed price action. Known faces in the industry discussing this likelihood include the likes of Tony Greer, Grant Williams & Stephanie Pomboy. Let's delve into three of the largest reasons for which experts are saying that Copper might be the next Bitcoin.
Shocking Chart Similarities
The first reason many are saying that Copper is following Bitcoin in price activity is due to the striking similarities in asset behaviors between the two. Taking a chart of both Bitcoin and Copper and conducting an analysis of them side-by-side, one can clearly see almost identical patterns. Firstly, both Copper and Bitcoin follow a pattern of sideways trading for a long period before experiencing an abnormal, rapid upswing in price. For Copper, this happened in 2011; for Bitcoin, it happened in 2018.
After these rapid spikes in price, both assets then underwent a massive price depreciation, bottoming out each. After the depreciation of both assets, they then regain ground at a steady pace until each one hits its previous high yet again. As far as Bitcoin is concerned, after the hit had reached its previous high, it then went parabolic and never looked back. Bitcoin would over triple in price in less than a year.
Now the only thing that remains to be seen is whether Copper will follow the same pattern as Bitcoin, as it has just recently reached its previous market high.
The Fundamentals
Next, we'll move on to some fundamental analysis regarding these assets and their behavior. Touching on fundamentals, we need to keep in mind that both supply and demand are crucial to this analysis, as usually people are only focused on the demand aspect of the asset price. We also want to make sure that we remember the fact that political events are just as likely to move these assets as economic news; another aspect viewers tend to forget. Lastly, we have to consider what our long-term view of the dollar is.
Possible Spikes in Demand
Taking our analysis to the website S&PGlobal, we begin to get a picture of c0pper from analysts specializing in the commodity. We see that analysts are projecting c0pper prices to rise in 2021, highlighting various aspects such as the fact that c0pper will flip into a deficit, or that the Chinese stimulus will spark a surge in demand.
An immense pillar of the C0pper argument is the fact that the green drive being pushed worldwide by governments, particularly of a democratic stance, will cause a permanent spike in C0pper demand. This is because C0pper is the most effective metal within the generation, transmission, storage, and consumption of electricity. Even further, if these implications hold weight, it means that it won't just be C0pper that experiences a rise in demand; but the entire commodities industry as a whole.
Commodities Index vs. The Dollar
Next, we take a look at a contrast between the commodities price index vs. a graph charting the price action of the dollar; both over a year-long period applying to 2020. Comparing and contrasting both graphs, we see an obvious pattern in that they have an inversely correlated relationship to each other; as the price of the dollar goes down, the commodities market goes up.
This ties into our point from earlier, touching on how the viewer must take into consideration their long-term perspective on the dollar's performance. If one believes that the dollar will continue to be beaten down by the various choices and actions of the fed, then one must also believe it to be likely that commodities will hold their elevated price level.
All in all, when it comes to the fundamental analysis aspect of this report, one must simply keep in mind the underlying political events that will guide the price action of these assets. Many people believe that the politicians and the fed will continue down their path of economic interference, and as such their actions should further perpetuate the commodities supercycle; further pushing up the prices of all commodities, and causing c0pper to behave similarly to bitcoin.
Should you buy Copper?
Now that we've discussed at length the similarities and fundamentals, we'll delve into whether or not you should bother yourself with following through and actually investing in copper. Although the previous pillars of info certainly seem to paint the picture that you'd be a fool o not pour everything you have into c0pper right now, it pays to take a step back and look at the situation from a wider perspective.
The Hype Surrounding Copper
Firstly, there are mountains of hype surrounding and circling c0pper as an asset. Everywhere you seem to look, there are news articles and journalism pieces touching on the so-called “reflation trade” which will take place with commodities and revitalize the economy. Whenever it seems that everyone is on one side, it should be questioned, and remember; nothing ever goes up in a straight line.
You can also begin to see advertisements for c0pper all over the place. Everywhere we look there seem to be ads advocating for the viewer to start investing in copper, claiming that we are in the last days before the climactic skyrocket. Although, yes, google is partly responsible for putting these ads in front of us due to our search history; it also stands true that these ads were nowhere to be found, say, a year ago.
The Long-Term View
Secondly, you want to make sure that you are maintaining a long-term perspective on your investment outlook. How are things going to look in 5 to 10 years from now? Not only that, but you also want to remain patient and remember that timing is crucial to properly seize an opportunity.
The catalyst that we'll be looking for in this situation is either market panic or market hysteria. Panic will equate to us needing to buy, whilst hysteria will equate to us needing to sell; shoutout to Jim Rogers.
The Solutions
Finally, we arrive at the last aspect of this report; the actions you can take to resolve this situation. Your first option is to bide your time and wait for an event that causes an opportunity for you to step into the market and buy in bulk. Your second option is to utilize technical analysis to ride the trend pattern of the commodities market. Your third and final option is to sell put options in the market to build a position for your long-term view.
I hope this report has helped you decide whether you should begin investing in copper or not, and remember to always be cautious and on your toes in the market. Stay frosty!