The Wolf Den #1198 - The South Sea Bubble
A cautionary tale.
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In This Issue:
The South Sea Bubble
Bitcoin Thoughts And Analysis
Ethereum Has Bearish Divergence
Are Markets Going Risk Off? Stocks Down, Oil Tumbling.
SWIFT Goes Digital
Middle Eastern Restaurant Group Adopts Bitcoin Treasury Strategy
Altcoins Pumping: Is The Crypto Bull Run Back?
The South Sea Bubble
“I can calculate the motion of heavenly bodies, but not the madness of men.”
Any guesses who said that? Think back to your early school days… physics… gravity…
If you guessed Sir Isaac Newton, you’re right.
Most know Newton as the brilliant mind behind the laws of motion and gravity – a foundational figure in modern science. His name is practically synonymous with genius. But what most people don’t know is that Newton also made one of the most infamous financial mistakes in history – a mistake that carries lessons we need to understand today.
Despite his unmatched intellect, Newton lost a fortune in the South Sea Bubble – an early 18th-century stock market crash fueled by speculation, hype, and human emotion. The quote above came as he reflected on that loss.
The South Sea Company, founded in 1711, was created to help Britain manage its growing war debt. Instead of repaying creditors in full, the government offered them shares in the company, promising regular interest payments in return. The company held a monopoly on British trade in parts of the Americas – including the transatlantic slave trade – and claimed that future profits from overseas commerce would generate massive investor returns. Public enthusiasm took off.
Profits were modest at first, but Newton – already holding government bonds and shares in the Bank of England – watched the company’s prospects rise. In 1720, the South Sea Company announced it would take over most of Britain’s national debt. Investors went wild. The stock price soared.
Newton, sensing a speculative bubble, sold early – locking in a solid gain.
But that’s not where the story ends.
Despite making the right call initially, Newton got pulled back in. He had no framework, no strategy – and more importantly, no insulation from emotion. As the mania grew louder and others raked in riches, he re-entered the market. Not once, but multiple times – for both himself and an estate he managed – right as the stock peaked and then began to collapse.
He bought three times at the worst possible moments.
Before the bubble, Newton’s net worth was just over £30,000 – a substantial fortune. He initially profited £20,000. But after reinvesting nearly everything back into South Sea shares, his wealth collapsed. By mid-1721, his net worth had fallen back to around £20,000 – not just wiping out his gains, but putting him behind where he started.
As the saying goes: what goes up, must come down.
The South Sea collapse followed a familiar pattern: speculation outpacing fundamentals, overhyped projections of future profits, and financial manipulation. There simply wasn’t enough actual business activity to justify the price surge. Once confidence cracked, reality returned with a vengeance. Panic selling took over. The bubble burst – overnight.
So what can we learn?
First, Newton’s failure reminds us that brilliance in one field doesn’t translate to immunity in another. He was a master of physics, mathematics, and astronomy – but human behavior and market speculation were his blind spots.
Second, while we now live in an age of endless information, we’re not necessarily wiser. The same psychological traps exist today – manias, bubbles, fear of missing out, and the intoxicating lure of easy money. None of us are immune.
Hopefully, this story reminds you that the skills we’re building here – understanding markets, mastering emotions, managing risk – aren’t innate. They must be learned and practiced. A neurosurgeon walking into finance has no more edge than a plumber, a teacher, or a mail carrier. When money and emotion collide, everyone starts at zero.
The bull market mania hasn’t arrived yet – but when it does, remember Newton.
If you never take profits, you risk watching the tide roll back further than where it began – and finding yourself worse off than before.
Bitcoin Thoughts And Analysis
Bitcoin has started to pull back slightly after tapping into the $106,099 resistance area, which has acted as a key level historically. This zone aligns closely with previous highs from February and March, making it a logical place for sellers to step in and take some profits.
Price is now moving back toward the $99,517 support – the previous breakout level that had served as resistance for much of April. A retest of this zone, ideally with a bounce, would be constructive and could confirm it as a new support. Keep in mind these levels are zones of interest, not exact lines – a wick below or above is entirely normal.
Volume has decreased during this pullback, suggesting that the move down may be more of a healthy cooldown rather than aggressive selling. RSI has also cooled off from overbought territory, giving bulls some breathing room to reload.
The trend remains bullish above the 50–day (blue) and 200–day (red) moving averages, both of which are sloping upward and stacked correctly. So far, this looks like standard consolidation after a parabolic move – not a sign of reversal.
A daily close back above $104K would suggest buyers are regaining strength. Below $99K, things could get more interesting, but for now, the structure remains intact.
Ethereum Has Bearish Divergence
I was looking for a local top in Ethereum and altcoins, and somehow forgot to mention this yesterday. Ethereum has bearish divergence with over bought RSI on every time frame from the daily down. This was a great topping signal, but also should indicate a bit more downside. The difference now is that I am looking to buy dips, not sell rips on altcoins.
Are Markets Going Risk Off? Stocks Down, Oil Tumbling.
Global markets pulled back as investor appetite for risk assets continued to wane, dimming the momentum behind Wall Street’s recent rally. S&P 500 futures dropped 0.6% while Brent crude oil fell to $64 a barrel after President Trump said the U.S. is nearing a nuclear deal with Iran. The retreat extended beyond equities and oil – gold, Bitcoin and the U.S. dollar also declined, and the 10-year Treasury yield dipped to 4.5%.
Traders are now looking ahead to remarks from Fed Chair Jerome Powell as well as data on manufacturing and retail sales for fresh insight into whether the sharp rebound in equities can continue. Economists expect retail sales to show no growth in April, reflecting a more cautious consumer. “The market is globally priced for perfection,” said Michael Nizard of Edmond de Rothschild Asset Management. “The retail sales figures should reveal that consumer is already depressed in terms of business confidence.”
At the Sohn Investment Conference, hedge fund billionaire Steve Cohen put the odds of a U.S. recession at 45%. He doesn’t expect the Federal Reserve to cut rates in the near term, citing concerns about inflation driven by tariffs. Cohen forecast U.S. GDP growth to slow to 1.5% or less next year, which he described as “OK but not phenomenal.”
High-flying stocks like Nvidia, Palantir and Tesla fell about 2% in early trading, while UnitedHealth dropped 5% following a report that it’s under criminal investigation for potential Medicare fraud. In Europe, the Stoxx 600 Index lost 0.2% – dragged down by falling energy shares. Asia’s MSCI benchmark also slipped 0.2%.
Oil prices reversed recent gains as the International Energy Agency cut its forecast for global demand growth for the rest of the year, warning that increased trade uncertainty will weigh on the global economy – and, by extension, on oil consumption.
Stocks
The Stoxx Europe 600 fell 0.2% as of 10:19 a.m. London time
S&P 500 futures fell 0.6%
Nasdaq 100 futures fell 0.9%
Futures on the Dow Jones Industrial Average fell 0.4%
The MSCI Asia Pacific Index fell 0.2%
The MSCI Emerging Markets Index was little changed
Currencies
The Bloomberg Dollar Spot Index fell 0.3%
The euro rose 0.3% to $1.1210
The Japanese yen rose 0.6% to 145.83 per dollar
The offshore yuan was little changed at 7.2093 per dollar
The British pound rose 0.2% to $1.3288
Cryptocurrencies
Bitcoin fell 1.5% to $102,067.11
Ether fell 1.8% to $2,553
Bonds
The yield on 10-year Treasuries declined three basis points to 4.50%
Germany’s 10-year yield declined two basis points to 2.68%
Britain’s 10-year yield was little changed at 4.70%
Commodities
Brent crude fell 3.6% to $63.49 a barrel
Spot gold fell 0.2% to $3,169.35 an ounce
SWIFT Goes Digital
SWIFT will launch live trials in November to enable banks across North America, Europe, and Asia to transact digital assets and currencies over its network. The initiative focuses on key use cases like payments, FX, securities, and trade, using multiple distributed ledger technologies.
This marks a major step toward unifying traditional finance with digital assets. By solving interoperability issues between fragmented digital networks, SWIFT is positioning itself as a bridge between the old and new financial systems - a move that could accelerate institutional adoption of blockchain tech.
Middle Eastern Restaurant Group Adopts Bitcoin Treasury Strategy
Al Abraaj Restaurants Group has become the first publicly listed company in Bahrain - and the broader Middle East - to adopt a Bitcoin treasury strategy. The Bahrain-based hospitality chain announced it will allocate a portion of its corporate reserves to Bitcoin, citing the cryptocurrency's long-term potential as a store of value and hedge against inflation. This move aligns Al Abraaj with a growing global trend of companies diversifying their balance sheets with digital assets.
Al Abraaj's decision marks a significant milestone for crypto adoption in the Middle East. By integrating Bitcoin into its treasury, the company not only signals confidence in digital assets but also sets a precedent for other regional firms to explore similar strategies. This could pave the way for increased institutional participation in the crypto space within the region.
Altcoins Pumping: Is The Crypto Bull Run Back?
Ethereum and altcoins are pumping, and eToro’s IPO just shocked Wall Street - is this the start of the next major crypto rally? I’m joined by Matthew Sigel, Head of Digital Assets at VanEck, to break it all down and unveil VanEck’s new ETF: NODE. We’ll cover what’s really fueling this altcoin surge and what it means for Bitcoin. In the second half, Chris Inks joins us to share some killer crypto trades and what he's watching beyond the charts.
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The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this e-mail constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.