The Wolf Den #640 - This Time Is Different
Welcome to The Wolf Den! This is where I share my ideas about the market, technical analysis, education and advice regarding trader psychology and emotional control. The newsletter is released every weekday and is completely FREE.
Trade all spot pairs on Bitget for ZERO fees! You read that right, zero fees...
Bitget is the best crypto exchange for both spot and leverage, world’s largest crypto copy trading platform, the official partner of Juventus Football Club and a top 5 exchange by volume as listed on CoinMarketCap!
Sign up using my link to Bitget and you will get:
• Up to an $8000 sign up bonus
• 15% discount on ALL futures trading fees
• 0 fees on ALL spot market pairs
In This Issue:
This Time Is Different
Bitcoin Thoughts And Analysis
Legacy Markets
The Bank of Japan Blinked
Paxful Delists Ethereum
More News From The Past Week
Why Interoperability Is Everything | Derek Yoo, Purestake & Moonbeam
My Recommended Platforms And Tools
This Time Is Different
"The four most dangerous words in investing are: 'This time is different.'” - Sir John Templeton
These words have the power to convince even the most rational investors to sell at the bottom or buy at the top. It's rare that this time truly is different, but there is a delicate truth to consider: if there never was a time for things to be different, there would never be a chance to make money.
To defend this idea, I want to reference Howard Marks's most recent investor memo, which was released last week. For those who are unfamiliar, Marks's philosophy at Oaktree on conventional and unconventional investments has greatly influenced my investing over the years. He is known for buying fear and providing some of the greatest (non-financial) advice of our time.
In the memo, Marks writes: "In my 53 years in the investment world, I've seen a number of economic cycles, pendulum swings, manias and panics, bubbles and crashes, but I remember only two real sea changes. I think we may be in the midst of a third one today." He goes on to discuss these sea changes in depth, explaining how the investment world underwent a major transformation in the mid-1970s with the rise of profit-driven methods such as high-yield bond issuance, private equity, and leveraged buyouts. This shift marked the first time investors began framing their thinking in a risk/reward model.
The second sea change occurred in the late 1970s to 1980s, when the Federal Reserve successfully brought down inflation and interest rates, leading to a rebirth of optimism and an incredible four decades of investing. However, Marks points out that the current financial environment is not as favorable as it was coming off of inflation highs in the past, and conditions today are less favorable than they were after the Great Financial Crisis. He cites several reasons for this, including a potential recession in the next 12-18 months, declining credit market conditions, slowing or worsening globalization, a lack of stimulative policies, the Federal Reserve's ballooned balance sheet, and a likely neutral interest rate policy.
So, things are worse than before.
In a way, "this time is different."
Marks also notes that credit instruments may provide a better return, leading to less reliance on "risky" investments. All of these factors suggest that this time may indeed be different, and the strategies that have worked well in the past may not be the ones that outperform in the future. This is the sea change Marks is referring to.
While it's rare that this time is truly different, it's important to consider the unique circumstances of the current financial environment and the potential impact on investment strategies.
There is something else that is also different this time... we have crypto, which is nearly guaranteed to be a part of this wave of change.
If you want to read the full memo, you can do so HERE.
Bitcoin Thoughts And Analysis
WEEKLY CHART
I went away for almost a week and very little has changed. Bitcoin continues to range sideways after the FTX drop. For now, we just sit and wait for a meaningful move in either direction - and some volume.
Legacy Markets
Some of the main moves in markets:
Stocks
The S&P 500 rose 0.3% as of 10:31 a.m. New York time
The Nasdaq 100 was little changed
The Dow Jones Industrial Average rose 0.2%
The Stoxx Europe 600 was little changed
The MSCI World index fell 0.9%
Currencies
The Bloomberg Dollar Spot Index fell 0.2%
The euro rose 0.3% to $1.0627
The British pound rose 0.3% to $1.2071
The Japanese yen fell 0.4% to 132.86 per dollar
Cryptocurrencies
Bitcoin rose 0.3% to $16,849.2
Ether rose 0.5% to $1,221.3
Bonds
The yield on 10-year Treasuries advanced five basis points to 3.73%
Germany’s 10-year yield advanced four basis points to 2.40%
Britain’s 10-year yield advanced five basis points to 3.64%
Commodities
West Texas Intermediate crude rose 3.4% to $80.16 a barrel
Gold futures rose 0.6% to $1,805.40 an ounce
The Bank Of Japan Blinked
Global markets were caught off guard on Monday evening when the Bank of Japan announced that it would allow the yield on its 10-year government bonds to rise to 0.5%, up from the previous cap of 0.25%. This move has been described as "yield curve control policy at its finest" and was met with surprise and shock by the Wall Street Journal and Bloomberg, respectively.
The Wall Street Journal dubbed the move, “a nasty early Christmas surprise” and Bloomberg called it a “shocker.”
Since central banks have been tightening their money supplies to combat inflation, Japan has remained steadfast in its determination to maintain a low-and-stable monetary policy. However, the Bank of Japan has now decided to go against the trend and expand its money supply by widening its bond window and taking on more debt. The full effects of this decision will likely take weeks to be fully understood, but it could be seen as a sign of the Bank of Japan and Bank of England breaking away from traditional practices.
And by "breaking away" I mean they are "broken."
It's worth noting that in times of uncertainty, some investors may turn to bitcoin as a safe haven asset.
Paxful Delists Ethereum
Ray Youssef's global peer-to-peer trading platform, Paxful, has officially removed Ethereum from its marketplace, citing "integrity over revenue" as the rationale for the decision. The three main reasons given for the removal of Ethereum were "the switch to Proof-of-Stake, its centralization, and tokenization."
It's worth noting that Paxful will still need to hold Ethereum in its wallets to support USDT and USDC, despite the decision to remove it from the marketplace. If even the "maxis" can't escape the need to hold Ethereum, then I am bullish on its prospects.
More News From The Past Week
A lot has happened in the world of cryptocurrency over the past week. SBF has been extradited to the U.S. and posted a $250 million bail (no, he did not have to put up 250M, it's a "guarantee" by his parents), and FTX executives Caroline Ellison and Gary Wang are now facing charges of their own while cooperating with prosecutors. Binance.US has agreed to purchase Voyager's assets, Wintermute has emerged as a new top player, and Dogecoin now has a larger market capitalization than Coinbase.
However, it's important to remember that 99% of news is often just noise. Aside from the significant event of FTX collapsing, nothing new has really happened that warrants jumping into a trade. It also seems that the consensus expectation is for a lower Bitcoin price, which means that the "max pain" (the price at which the most investors will experience losses) may not be down, but up. Of course, it's possible that the price could go down as well, causing pain either way. It's difficult to predict what will happen, but the fact that Dogecoin has overtaken Coinbase in market capitalization could be a sign that a bottom is near.
Why Interoperability Is Everything | Derek Yoo, Purestake & Moonbeam
Why is interoperability essential for blockchain protocols? What is Moonbeam? Why is it unique? What stops the mass adoption of crypto? I sat down with Derek Yoo, CEO of Purestake, the company behind Moonbeam network, an Ethereum-compatible smart contract parachain on Polkadot. We discussed what’s going on with all layer zeroes and ones, and why crypto needs interoperability.
My Recommended Platforms And Tools
Proud sponsor of The Wolf Den Newsletter. The world's biggest crypto copy trading platform, up to a $3000 bonus for signing up.
I use RoundlyX to buy small amounts of Bitcoin every single day. They automatically round up my credit card purchases (with 10x multiplier) and invest them in crypto. Absolutely brilliant. Passively invest money you don’t need without a thought.
Rewards Code: WOLF
Concierge Phone Service for Americans that protects your from SIM Swaps and other phone related hacks. I cannot stress enough how amazing this service is.
Subscribe to my YouTube channel for free daily content.
Follow me on Twitter at @scottmelker. This is where I am constantly updating my trades and sharing ideas.
On-chain and fundamental analysis, research, predictions and indicators, all in one place. Highly recommend.
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.
IF YOU HAVE ANY ISSUE WITH THE NEWSLETTER OR YOUR SUBSCRIPTION, PLEASE CONTACT: PREMIUMSUPPORT@GETREVUE.CO