The Wolf Den #651 - The BlackRock Story
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In This Issue:
The BlackRock Story
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
Fractional Reserve Banking And Bitcoin
The DOJ Seizes Robinhood Shares
Thai SEC Launches Crypto Academy
First Steps In Crypto | Caitlin Cook, Hxro Network
The BlackRock Story
Legends, prophecies and myths are deeply ingrained in crypto culture. None are greater than the the narratives surrounding institutional adoption.
In 2017, the crypto hive mind swore that the institutions were coming and the floodgates were opening. In 2020 we believed that the institutions and flood were here.
The institutional crypto narrative has played a major role in every crypto cycle - not always for the better. Cycle tops have almost always come with huge news from the legacy world, including the launch of Bitcoin futures, Coinbase going public and the Bitcoin Futures ETF.
It should be clear that a variation of this narrative will once again lead the market through another cycle.
The next cycle of this narrative has already begun, although few people are talking about it.
So let's talk about BlackRock.
My long-time readers know that BlackRock is a recurring character in this newsletter. In case you are new, here’s a quick primer (my old thoughts) to get you up to speed.
“The $10 trillion investment management company, unparalleled in size and strength, has finally broken the ice in a meaningful way. Many view BlackRock like the Empire in Star Wars - they are not exactly a benevolent operation. Cheering their entry into the space makes sense for widespread adoption and the number going up, but requires a bit of cognitive dissonance for those looking to opt out of broken and oppressive systems. Bitcoin was created to rage against this very machine.”
You get the idea.
Let’s take a closer look at how BlackRock got here in the first place. You’ll notice that BlackRock has quietly carved out a leading role... and nobody seemed to notice.
BlackRock Dismisses Bitcoin
BlackRock’s earliest public commentary on Bitcoin came at a time when we were foolishly convinced institutions were on the brink of blindly dumping their capital into the space.
In 2017, Larry Fink, BlackRock’s CEO, said the following: “Bitcoin just shows you how much demand for money laundering there is in the world. That’s all it is.”
A month prior to that statement, JPMorgan CEO Jamie Dimon said, “I personally think that Bitcoin is worthless, it’s fraud and worse than Tulip Bulbs. It won't end well.”
It was a rough start for adoption by major institutions, but at least they were talking about us.
Rocky Balboa has a quote on this.
“The world ain't all sunshine and rainbows. It's a very mean and nasty place and I don't care how tough you are it will beat you to your knees and keep you there permanently if you let it.”
BlackRock Experiments With Bitcoin
Four years passed with little more than crickets and tumbleweeds. Then we learned that BlackRock had secretly been trading Bitcoin futures on the CME.
It dominated the news cycle for roughly 5 minutes. Then we learned that BlackRock only earned $360,000 from holding $6.5 million in CME contracts. At the time, these holdings represented 0.03% of the firm’s AUM, and the gains represented just 0.0014%.
Some considered this news to be laughable, but we knew it meant something bigger. BlackRock was willing to get their feet wet.
BlackRock Invests In Stablecoins
Almost another year passed and BlackRock made headlines again. Once again, the attention was short-lived.
“BlackRock to Handle Circle's USDC Cash Reserves as Part of $400M Funding Round.”
BlackRock was a leader in Circle’s funding round. They were quietly studying digital currencies, stablecoins, and the underlying technologies to understand how crypto could help better serve their clients.
The news wasn’t sexy, but for the folks who were paying attention, BlackRock was signaling a serious move into crypto.
BlackRock Opens The Floodgates
In August of 2022, BlackRock made a bold move, signaling that the floodgates were open.
The headlines read: “BlackRock partners with Coinbase to expand into crypto” and “Coinbase selected by BlackRock.”
BlackRock's commitment to crypto was no longer in question. The world's largest asset manager arrived in a big way.
What Is BlackRock Doing Now?
“BlackRock Adds Bitcoin to Global Allocation Fund.”
Investors can gain Bitcoin exposure via BlackRock’s fund. The fund's AUM is currently $15 trillion.
We can all learn a lesson from BlackRock.
They slowly tested the waters, getting their feet wet and learning about the market that they were interested in entering. This is exactly how individual investors should approach Bitcoin - and every other market.
BlackRock’s story isn't your typical hero's journey. It is silent and calculated - well disguised yet very present and important.
BlackRock plans to dominate crypto.
Maybe they already do.
Bitcoin Thoughts And Analysis
DAILY CHART
Bitcoin looks decent, altcoins look better.
BTC is trading convincingly above the blue 50 MA for the first time since the FTX collapse, which gives us a target of the red 200 MA. There's a lot of resistance ahead, but I would expect with time for us to see a few more thousand dollars of upside.
That is, of course, if price can get above the June lows of $17,592...
Honestly, this is all still sideways action within a range, but there are encouraging signs. We will take what we can get.
Altcoin Charts
I am currently traveling unexpectedly, so I do not have full access to my charts. I can only say that altcoins are enjoying a moment of bullishness, many breaking out through descending resistance and above key MAs. If you are trading, now is a decent time to take on a bit of risk with tight stops. It could end at any moment, and all markets certainly have a lot more pain potentially in store.
ETH/USDT
As I pointed out last week, ETH was leading the move up by breaking and holding above the blue 50 MA. The next clear target was the 200 MA, which it is rapidly approaching.
A break above the $1,400 area should signal further bullishness, with a target of overhead supply (red zone) around $1,700.
Again, things can change fast!
Also important to note that both the 50 MA and 200 MA are starting to curl up, which is bullish.
Legacy Markets
"Stocks joined gains in global risk assets and the dollar fell on speculation that the Federal Reserve will be able to slow its pace of rate hikes as inflation shows signs of cooling.
The US CPI report will come out nearly a week after the latest jobs data showed that wage growth cooled in December. The figures will be among the last such readings policy makers will see before their Jan. 31-Feb. 1 meeting. Economists are penciling in a 25 basis-point increase in the Fed’s benchmark, though officials have indicated a half-point hike is possible.
“Wage gains have started to soften and that has given traders some hope that the Fed can relax its aggressive stance on inflation fighting in the months ahead,” said Dan Wantrobski, technical strategist at Janney Montgomery Scott.
If last week was any indication, the factors that drove so much of 2022’s market action — inflation and the Fed’s response to it — will continue to exert their influence this year, according to Chris Larkin at E*Trade from Morgan Stanley.
“Any bullishness triggered by slowing inflation may be offset by stocks still-high valuations and overly optimistic earnings expectations,” said Larkin.
Morgan Stanley’s Michael Wilson said that while investors are generally pessimistic about the outlook for economic growth, corporate profit estimates are indeed still too high. That suggests the S&P 500 could fall much lower than the 3,500 to 3,600 points the market is currently estimating in the event of a mild recession, he said.
Key events this week:
US wholesale inventories, Tuesday
Fed Chair Jerome Powell among speakers at Riksbank symposium in Stockholm, Tuesday
World Bank expected to release global economic prospects report, Tuesday
ECB Governing Council members speak at Euromoney conference in Vienna, Wednesday
US CPI, initial jobless claims, Thursday
St Louis Fed President James Bullard at Wisconsin Bankers Association virtual event, Thursday
Richmond Fed President Thomas Barkin speaks at VBA/VA Chamber, Thursday
China trade, Friday
US University of Michigan consumer sentiment, Friday
Citigroup, JPMorgan Chase, Wells Fargo report earnings, Friday
Some of the main moves in markets:
Stocks
The S&P 500 rose 0.9% as of 10:31 a.m. New York time
The Nasdaq 100 rose 1.7%
The Dow Jones Industrial Average rose 0.4%
The Stoxx Europe 600 rose 0.9%
The MSCI World index rose 1.3%
Currencies
The Bloomberg Dollar Spot Index fell 0.7%
The euro rose 1% to $1.0746
The British pound rose 0.8% to $1.2192
The Japanese yen was little changed at 131.98 per dollar
Cryptocurrencies
Bitcoin rose 1.7% to $17,242.75
Ether rose 4.4% to $1,325.42
Bonds
The yield on 10-year Treasuries advanced one basis point to 3.57%
Germany’s 10-year yield advanced five basis points to 2.26%
Britain’s 10-year yield advanced six basis points to 3.53%
Commodities
West Texas Intermediate crude rose 2.5% to $75.58 a barrel
Gold futures rose 0.6% to $1,880.20 an ounce"
Fractional Reserve Banking And Bitcoin
I wrote this blog on fractional reserve banking and its relation to crypto. In many respects, the truth behind the "Bitcoin fixes this" joke has to do with fractional reserve banking.
The DOJ Seizes Robinhood Shares
A total of 55,273,469 shares of Robinhood that belonged to an FTX shell company have been seized by the Department of Justice. According to the filed affidavit, FTX executives borrowed money from Alameda to purchase the $456 million worth of Robinhood equity and SBF owns 90% of the shell company that made the purchase.
To state it plainly, customer deposits were sloshed around until they found their way to Robinhood. Those shares have now been seized by the government.
As drawn out and frustrating as this is, it is a win for creditors to have the shares become a part of the bankruptcy proceedings.
Thai SEC Launches Crypto Academy
The Thai SEC has launched a crypto academy to help educate investors on the asset class so that they can make informed decisions.
The US SEC is suing everyone they can find after consumers have already been stung.
Which approach do you think it better?
First Steps In Crypto | Caitlin Cook, Hxro Network
Whether you are a retail investor or an institutional one and you are new to crypto and want to learn about it but don't know where to start, join Caitlin Cook, Head of Marketing and Communications at Hxro Labs, who will guide you through the most interesting journey of your life.
In this episode with Caitlin, we discussed:
Advice to people who are new to crypto
Nimber one: stablecoins
NFTs and communities
Identifying lasting communities
Avoiding scams
Institutional investors in line with the retail ones
Educational content
Elevator pitch for crypto
What is Hxro?
Why do we need derivatives?
Final advice to newbies
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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