Nearly two weeks ago I spoke with Bob Moriarty, founder of 321gold, and he couldn’t wait to start the interview discussing how Bitcoin (and cryptocurrencies as a whole) was in a massive bubble that was about to burst. Fast forward ten days later and we’ve just seen the beginning of what could be the unwinding of the ‘Bitcoin bubble.’ Bob’s favorite junior gold mining play Novo Resources has also had a tough week so I figured it was time to get Bob on the phone again for a quick chat before the Christmas Holiday weekend began…
CEO Technician: We spoke about two weeks ago Bob, Bitcoin was around $17,000 at the time and you were adamant that it was a bubble that was on the verge of bursting. We’ve seen a nearly 50% drop in Bitcoin this week (to a low of around $11,000 from a peak near $20,000), is this the bubble bursting?
Bob Moriarty: A couple of days after we spoke Bitcoin hit nearly $20,000 but it had been displaying signs of a mania for several weeks. McAfee was saying it was going to $1 million, Celente was saying it couldn’t be a bubble. You’ve got to have cheerleaders at the top just like Bunker Hunt with silver in 1980 and Eric Sprott with silver in 2011. McAfee might end up being the face of the Bitcoin bubble.
It was a bubble and it has burst. It’s not going to stop at $11,000.
CEO Technician: How far can it fall Bob?
Bob Moriarty: To zero.
CEO Technician: (laughs out loud)
Bob Moriarty: Here’s what’s really funny, for something to have value it has to have some use. Bitcoin can’t be used for anything. Most people can’t even buy or sell their Bitcoin during periods of intense price activity. Bitcoin’s only value was the fact that it had gone up so much. It has 1,300 other competitors and it has ‘forked’ twice. The advocates of Bitcoin Cash are even saying that Bitcoin Cash is the real Bitcoin. So every rational reason for explaining why it has some value has turned out to be false.
CEO Technician: Yesterday I pointed out the technical damage and bearish change in character in Bitcoin before the overnight crash. From my vantage point the Bitcoin chart needs time to heal because now you have every buyer in the last three weeks underwater and disappointed that they aren’t sitting on enormous gains.
Bob Moriarty: A day before we spoke two weeks ago I did an interview on YouTube. There were about 80 comments on this interview and about 75 of those comments were people telling me how stupid I was. I am one of the few guys who has accurately called bubbles in the past and this is going to end exactly the same way every other bubble does. When the chart goes curvilinear and everyone thinks they’re going to get rich overnight, the crash isn’t far away.
CEO Technician: This morning I saw a well known technician post the silver chart from 2011 and so far it looks very similar to the Bitcoin chart. Is this going to play out in a similar fashion?
Bob Moriarty: Yes, 100%. If you go back to April 25, 2011 I wrote an article on the exact day silver topped and Jim Rogers was saying silver wasn’t in a bubble. You’ve got to have really smart guys who are telling people “this time is different” at the top. Bitcoin had that exact thing with John McAfee and Celente and many others.
CEO Technician: I saw an excellent tweet this morning highlighting the 4 key conditions (from William Bernstein’s “The Four Pillars of Investing”) for a bubble to be in place:
Bitcoin (and cryptocurrencies as a whole) has every single one of these. The 4th condition stands out to me as being extra present in the current crypto craze as we have lots of people who have never invested in anything who are suddenly all-in on cryptocurrencies.
Bob Moriarty: Strange enough the bond market and the stock market are also in bubbles. Something is always in a bubble. We might see the 35 year bond bubble unwind in 2018 as you pointed out several days ago.
CEO Technician: I don’t want to take up too much of your time today but do you have any comments on the crash we’ve seen in Novo Resources (TSX-V:NVO, OTC:NSRPF) this week? It seems the market doesn’t like the rest of the trench results from August, why did these take so long?
Bob Moriarty: This took a long time because the lab (Nagrom) had to get a new Steinert sorting machine set up. Do you have any idea of the average grade and average thickness of the Witwatersrand?
CEO Technician: It’s about 8 grams/tonne and I believe it’s a few meters thick.
Bob Moriarty: It’s 8-11 g/t Au and it’s less than half a meter thick. I put this in writing a while back and I believe the Pilbara gold could be up to a meter thick and the grade is higher than the Wits. The problem Novo has because the grades of the first trench results were so exceptional (67 g/t Au) everyone’s disappointed when they report 15 g/t Au.
There were also guys who had a lot of credibility running around talking about 20 billion ounces. This created unrealistic expectations and it was irresponsible. Everything that Novo and Quinton have done has been very professional and the results are spectacular, but people are nervous and they’re bailing out.
CEO Technician: This seems like a classic case of market expectations getting way ahead of themselves. When people are talking about a billion ounces of gold it’s almost as if the company can only disappoint at that point.
Bob Moriarty: That’s correct. Rick Rule says that every single stock that explodes to the upside eventually has a 50% correction and he’s absolutely correct. This is an opportunity to get in at much more manageable expectation levels. I feel bad for people who got in at $7 or above, but my readers got in below $1. I’ve been pounding the table on this for five years and i’ve put out accurate information. You need to pay attention to who you listen to.
CEO Technician: One final question. If someone was completely new to the market and came in today and saw Novo trading in the C$3.70 area in Canada should they buy today?
Bob Moriarty: If someone is new to the story today they shouldn’t buy Novo, they should buy Kirkland Lake Gold (NYSE:KL, TSX:KL) because KL owns so many Novo shares and they are an extremely well run company that has several other exciting projects. Kirkland Lake is a less leveraged bet on Novo.
We’d like to thank Bob for his insights and wish all of our readers a very merry Christmas!
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