The Wolf Den #655 - Be Prepared
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In This Issue:
Be Prepared
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
AWS Partners With Avalanche
Binance Is Ready To Scale
CPI Falls
Twitter Coins
The SEC Charges Gemini And Genesis
Be Prepared
Over the past few weeks, I have been contemplating a few questions that required more time and deeper consideration. As these questions pertain to the current market situation, which has shown signs of improvement, I believe now is an opportune time to share them.
All three inquiries pertain to sentiment in the market and may offer insight into what is to come.
Let's begin.
Is Bearish The New Bullish?
At one point, the fear of financial contagion in the crypto market was a legitimate concern for all. Its spread and impact were unknown, much like the early days of the COVID-19 pandemic. At this early stage, it was uncertain who would collapse, who would survive, and who would be caught in the middle. But now, we have a clearer understanding of the market landscape.
I do not want to assert that we have reached a bottom, but I do believe that the market has accurately priced in what we have learned and the remaining risks. Would the collapse of a company like Digital Currency Group or other weak entities really lead to another year of pain? More plainly, is bearish news soon to become bullish?
What we know is that the contagion will not infect everything, and the more it kills, the fewer entities will be left to catch the bug. Additionally, bankruptcy proceedings can be lengthy and may result in assets being locked up for years to come. In a strange twist, the market's own undoing could halt selling and tie up assets, which could unintentionally turn out to be bullish events. The truth always surfaces and the strong always survive; one more punch to the jaw might be the adrenaline boost we need to turn the market around.
Just as J.K. Rowling wrote in her book, "rock bottom became the solid foundation on which I rebuilt my life."
What Direction Would Cause Max Pain?
The market gods seem to take pleasure in punishing those who make incorrect investments. And when it comes to punishment, the market gods do not always follow conventional methods. This is why markets can rise when investors have no exposure and fall when they are holding too much.
So, what would hurt the most? The standard answer is that downward price movement would harm many companies already struggling, but it would please investors who have predicted lower lows. On the other hand, there are a group of companies that have already been severely punished and investors who are waiting for lower lows. Who will bear the brunt of it?
Up could also cause tremendous pain for investors who lost their assets on bankrupt platforms. Watching the market rise while they have no exposure and being forced to eventually buy back higher would be brutal.
In my honest opinion, there is pain in all directions. Even sideways action would be painful because it would lead to more traders becoming bored and continue to drain the cash of beaten-down companies. A slow grind-up would certainly benefit the majority of investors, but as it stands right now, we are in nobody-wins-limbo.
What If There Are No More Failures?
The previous section brings me to my next point, which is straightforward. If there are no more failures (bankruptcies), and there's nothing left to drag prices down, are you prepared? Prepared means different things to different people, but are investors truly ready for the tide to come rolling back in?
I fear many of us have forgotten how to navigate such a market.
Disciplined investors will welcome the rush of water, but for many, it will be a hazardous shock. Bull markets are the time to make money, but they also come with their own set of traps. FOMOing back into the market could be profitable, but it's a risky play. It's also important to watch out for over-trading the market. The past two bull markets lasted approximately 1,000 days, providing ample time to strategically position a portfolio. Failing to prepare is preparing for failure, but also failing to prepare for success is a failure in its own right.
In short, be ready for all possible outcomes. Don't be caught off guard when the market unleashes the bull.
Bitcoin Thoughts And Analysis
DAILY CHART
Impressive. Bitcoin's daily candle yesterday closed right at descending resistance and is now breaking out above. RSI is at 80, so this is quite overbought now. I would be surprised if this makes it past the 200 MA above without at least a retrace or pause. This looks, for now, like a buy the dip asset if you believe that the trend will continue. I am cautiously optimistic, but hesitant because everything looks overbought.
Altcoin Charts
I do NOT share signals in this section. I share setups and charts that I am watching, in an effort to help show you how I view a chart and what criteria would be necessary for me to consider taking a trade. NEVER blindly buy something because it is listed in a newsletter or posted on twitter. You need to have a plan when you enter a trade. These are just ideas, and are almost always “if, then” scenarios. If a certain set of things happen, then I would consider a trade.
APT/USDT
Aptos was the most hyped project at 2022, and unfortunately fell victim to a poorly timed launch and a relationship with FTX.
That said, it has broken out hard and is overbought. I would not buy now, but would be looking for a retest of $5.43. That was the key level of resistance to be tested as support.
The first target would he around $8.23.
Legacy Markets
Stocks and Wall Street equity futures are steady as investors consider prospects for less-aggressive rate hikes as inflation pressures ease and wait for earnings reports from major banks to gain insight on the state of the US economy. European stocks have gained and are on track for their strongest performance in the first two weeks of January on record. Air France-KLM jumped after analysts upgraded the airline due to a bullish view on the sector amid pent-up travel demand. The Federal Reserve is on track to downshift to smaller interest-rate increases after figures showed a further cooling in inflation. Bank of America strategists say US stocks are poised for a fresh slide before ultimately rallying in the second half of the year when economic conditions stabilize. A gauge of the Asian shares climbed, on course for the highest level since June.
Key events this week:
US University of Michigan consumer sentiment, Friday
Citigroup, JPMorgan, Wells Fargo report earnings, Friday
Stocks
The Stoxx Europe 600 rose 0.6% as of 10:28 a.m. London time
S&P 500 futures were little changed
Nasdaq 100 futures fell 0.1%
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index rose 1.1%
The MSCI Emerging Markets Index rose 1.2%
Currencies
The Bloomberg Dollar Spot Index fell 0.2%
The euro was little changed at $1.0846
The Japanese yen rose 0.7% to 128.34 per dollar
The offshore yuan was little changed at 6.7280 per dollar
The British pound rose 0.2% to $1.2240
Cryptocurrencies
Bitcoin rose 0.6% to $18,938.11
Ether fell 1.1% to $1,411.15
Bonds
The yield on 10-year Treasuries was little changed at 3.45%
Germany’s 10-year yield declined five basis points to 2.11%
Britain’s 10-year yield declined three basis points to 3.31%
Commodities
Brent crude rose 0.6% to $84.56 a barrel
Spot gold rose 0.4% to $1,905.56 an ounce
COIN (COINBASE)
After deviating below, Coinbase has recaptured the range lows at $40.83. Holding this as support should eventually lead to a revisit of the range highs - $116.30.
AWS Partners With Avalanche
Amazon's cloud-computing network, AWS, has partnered with Ava Labs to "accelerate enterprise, institutional, and government adoption of blockchain." What's interesting about this announcement is that Ava Labs is the first true partnership for AWS. AWS continues to support other blockchains, most notably Ethereum, but has never partnered with a foundation until now. Through this partnership, AWS will assist and contribute to Avalanche's node deployment, dApp development, and subnet launches. Despite this, AWS remains a crypto powerhouse but receives little attention in mainstream news. Did you know that AWS alone accounts for 25% of Ethereum's workload? This is how bull markets are built.
Binance Is Ready To Scale
Despite the wave of negative sentiment last month, Binance has never looked stronger. While other major crypto institutions and traditional financial institutions are cutting back (with repeated layoffs), Binance is looking to add 15% to 30% to its workforce in 2023, which is impressive. At a conference this week, CZ, the CEO of Binance, reported that the company grew from 3,000 to 8,000 people in 2022 alone.
CZ also made an interesting prediction, "We have one business that is pretty big, pretty profitable, but it is not going to last forever...we don't want to become the Kodak. We want to disrupt ourselves rather than other people disrupting us. And in 10 to 15 years there will be a decentralized exchange that is bigger than Binance." This prediction sounds quite reasonable, doesn't it? I think so.
CPI Falls
Inch by inch, the Consumer Price Index (CPI) is on its way down, ending 2022 with the largest decrease since April 2020. In line with the Dow Jones estimate, the December CPI dropped 0.1% from the previous month, moving from 7.1% in November to 6.5% in December. The most notable aspect of the report was the drop in oil prices, which recorded a -16.6% drop for the month, now on a lower even on a year-over-year basis. However, even with this victory, there is still room for improvement in the areas of food, transportation, and shelter. Additionally, gas prices may have decreased but still remain relatively expensive. Despite this, the tightening of the market appears to be working slightly, which may indicate a soft landing is possible.
I have my doubts.
Twitter Coins
I can't imagine the crypto community would be pleased if Elon Musk adds a payment feature to Twitter that doesn't include cryptocurrency. Rumors have surfaced of an unofficial feature in the works called "Coins" similar to Reddit Coins, which would allow users to support creators on the platform. These coins, which are said to be gold in color and bear the Twitter logo, can reportedly be exchanged for $50 once a threshold is reached. However, it should be noted that all of this is still just a rumor, stemming from a tweet that leaked the information.
The SEC Charges Gemini And Genesis
The complaint heightens weeks of turmoil between two of crypto's top companies.
The U.S. Securities and Exchange Commission (SEC) has charged crypto companies Gemini and Genesis with the unregistered offer and sale of securities to retail customers in a complaint filed in the U.S. District Court for the Southern District of New York. The dispute between the two companies began in early January over an investment product that promised customers high yields for lending their crypto assets. Gemini had partnered with Genesis Trading to launch a new product called Gemini Earn, where customers could earn yields approaching 8% for storing cryptocurrencies on the platform. However, after the collapse of FTX in November, Genesis suspended redemptions and disclosed that it had about $175 million in funds locked up on the failed exchange, which hurt Gemini. The SEC alleges that the Gemini Earn product constituted the offering of unregistered securities, bypassing required disclosures.
Once again, Gensler is reacting instead of acting.
This protects nobody.
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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