The Wolf Den #535 - This Is What Capitulation Looks Like
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In This Issue:
This Is What Capitulation Looks Like
Bitcoin Thoughts And Analysis
Legacy Markets
Voyager Files For Bankruptcy
Jeremy Allaire Shuts Down Rumors
3AC Holds NFTs...
Exchanges See Massive Outflows
Why Crypto's Core Problems WILL Get Solved Ft. Haseeb Qureshi
My Recommended Platforms And Tools
This Is What Capitulation Looks Like
There’s been a long-running joke in the community that a certain group of individuals need to capitulate in order for the market to find a bottom. There’s approximately zero science behind this line of thinking, but it tends to be at least a vague signal when all else fails.
At the top of this “Capitulation List” is our good friend Jim Cramer over at Mad Money.
Not to point fingers or make fun, but I want to show you what capitulation looks like. For the full video, click HERE. For the transcript of what I am talking about, continue below.
“Everything is bad, every asset class is getting hurt. The one I am most interested in is crypto. Crypto really does seem to be imploding. It goes from $3 trillion to $1 trillion. Why should it stop at $1 trillion? There's no real value there…. NFTS sigh. You look at these companies you have never heard of and they blew up over the weekend and you say to yourself holy cow, there is $600m going down the drain. We had Gary Gensler on a few weeks, ago, he said look, anyone that has a come hither rate, a rate that you can earn, you can kind of forget about them. How many places can Sam Bankman-Fried save?”
I want to be explicitly clear before I continue on this subject. We have all been wrong more times than we can count. But this isn't about right or wrong. Let me explain.
There is a difference between changing your mind in light of new information, which is a sign of intelligence, and capitulating when things don't go your way. Cramer does not appear to have changed his mind based on "new info," because there isn't anything new. Yes, crypto is being cleansed, but the fundamentals are still there.
I won’t bother quoting Cramer’s bullish analysis on crypto. It’s out there if you want to find it. There is a LOT of it.
I think what this means for us is that we are one step closer to the bottom. I would be a bit surprised if crypto started a new bull market today, but I do think we are nearer to the bottom than many believe. Jim Cramer mentions SBF in his monologue, who happens to be clearly long the space right now, considering he is looking to “rescue” companies and dish out more money.
If I had to pick between team SBF and team Cramer, you know what hat I’m putting on.
Long story short? Don’t capitulate because things didn't go your way, but do change your mind in light of new evidence. Figure this out and you can survive any storm.
Bitcoin Thoughts And Analysis
DAILY CHART
The daily chart shows the very clear bear market trend, with lower highs and lower lows consistently since 69K. Making a higher high would be the first sign of an emerging bull market, not something that is remotely in view for the moment.
As you can see, price appears to be forming a bear pennant, although patterns are just idea until they are confirmed, which would come with a break of the lower ascending support line. Even then, these rarely play out to their full potential.
Technically, you ascertain the target by measuring the length of the "flagpole" down. This would start around $32,000 and give a $10,000 target.
Not concerned about it for now, but that's a clear pattern forming.
Peter Brandt seems to agree.
Legacy Markets
What to watch this week:
FOMC minutes, US PMIs, ISM services, JOLTS job openings, Wednesday
EIA crude oil inventory report, Thursday
Fed Governor Christopher Waller, St. Louis Fed President James Bullard, scheduled to speak, Thursday
ECB account of its June policy meeting, Thursday
US employment report for June, Friday
Some of the main moves in markets:
Stocks
Futures on the S&P 500 were little changed as of 6:03 a.m. New York time
Futures on the Nasdaq 100 were little changed
Futures on the Dow Jones Industrial Average were little changed
The Stoxx Europe 600 rose 1.4%
The MSCI World index was little changed
Currencies
The Bloomberg Dollar Spot Index rose 0.2%
The euro fell 0.4% to $1.0224
The British pound was little changed at $1.1938
The Japanese yen rose 0.4% to 135.29 per dollar
Bonds
The yield on 10-year Treasuries was little changed at 2.81%
Germany’s 10-year yield advanced five basis points to 1.23%
Britain’s 10-year yield advanced two basis points to 2.07%
Commodities
West Texas Intermediate crude rose 0.5% to $100 a barrel
Gold futures were little changed
Voyager Files For Bankruptcy
Voyager has filed for bankruptcy. There is quite a bit of conjecture as to what this means for customers, but we can assume that, for now, partnerships and bailouts are off the table.
I am waiting for more information to comment further. As you likely know, I have millions of dollars on Voyager. Now that Chapter 11 is public, the executives should be allowed to discuss public information, so I anticipate being able to speak with them directly to provide you (and myself) with more clarity.
Here is a full twitter thread from CEO Steve Ehrlich.
Jeremy Allaire Shuts Down Rumors
The integrity of dollar backed digital currencies has come into question since Terra Luna’s collapse, but a few staples appear to be stronger than ever. Take a look at Circle’s CEO Jeremy Allaire’s most recent statement, “Circle is in the strongest position it has ever been in financially, and we will continue to increase our transparency.”
If you are skeptical about USDC reserves, I suggest you take a look at Circle’s monthly attestation reports conducted by Grant Thornton LLP, one of the largest accounting firms in the U.S. These can be seen on Circle’s website, posted for public viewing. Also, Circle’s yield is only available to accredited investors, another way in which the company is remaining insulated and within the law.
“There is also some obvious confusion between USDC reserves — which are regulated (where and what we can hold), examined (by regulators and assurance firms), and transparent (weekly flows and composition) — and USDC that itself is used in lending markets, away from Circle.” Jeremy Allaire.
3AC Holds NFTs
You think cryptocurrencies are down bad? Well, NFTs are in the depths of the financial blender, which is loaded with sharp ice and turned up on the highest setting. And guess what? 3AC has a pretty large NFT collection. Since NFTs are priced in cryptocurrencies that are losing value, and bidders are bidding less crypto per NFT, the value is dropping at a much faster rate. Reports are showing that 3AC owns a total of 377 NFTs, which include 11 CryptoPunks, 330 ArtBlocksCurated, 2 Mutant Apes, and 1 Bored Ape. All of these NFTs combined have an estimated value of about $7m. Lord knows what that valuation was 6 months ago and what they thought it would be.
Exchanges See Massive Outflows
It used to be a commonly accepted idea that exchange inflows meant incoming selling and exchange outflows meant increasing prices. Now that consumer confidence in exchanges is at an all-time low, this theory might have to be put to rest. Here's an interesting stat: "since March 2020, over 750,000 BTC has been taken out of exchanges. However, in the past three months alone, 18.8% of the total or 142.5k BTC was seen in outflows." At least for the time being, I don't see this as either a bullish or bearish stat.
Why A Bear Market Is The Best Time To Invest | Haseeb Qureshi, Dragonfly Capital
A lot of things seem to be breaking in crypto, but is it as bad as it seems? Haseeb Qureshi, Managing Partner at Dragonfly, joined me on the show to discuss these growing pains. We had an honest conversation about how crypto can’t solve everything and why it’s so important to learn from our mistakes instead of criminalizing them. You don’t want to miss this conversation with one of the most brilliant minds in the space.
In this episode with Haseeb, we discussed:
Fundamental problems or growing pains? A deep dive on Luna
Why we should learn from mistakes instead of criminalizing them
Solana’s instability
Deploying $650 million in a bear market
Crypto trends
Adding value by solving big problems
Crypto can’t solve everything
Why crypto’s core problems will be solved
What does it mean to use crypto?
The biggest human problems
Why education in this space is so important
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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.
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