The Wolf Den #660 - Peter Thiel Sold Bitcoin. Off With His Head!
They Love You When You Buy and Hate You When You Sell
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In This Issue:
Peter Thiel Sold Bitcoin. Off With His Head!
Bitcoin Thoughts And Analysis
Legacy Markets
Stop Losses - The Basics
Will FTX Make A Comeback?
Jamie Dimon’s Thoughts On The Market
Dragonfly Capital Is Bullish On Ethereum
Google Firing 6% Of Employees
Peter Thiel Sold Bitcoin. Off With His Head!
The Financial Times recently published a report on Peter Thiel that has generated significant backlash within the cryptocurrency community, as it was revealed that the prominent billionaire investor, entrepreneur, and political commentator had divested his holdings in Bitcoin. This move has been met with widespread condemnation, as it is perceived as a betrayal of the crypto community by one of its most prominent supporters.
They love you when you buy and hate you when you sell.
Here’s my best attempt at summarizing the story.
Peter Thiel is a renowned entrepreneur, investor, and technology visionary, known for co-founding influential companies such as PayPal, Palantir Technologies, and Founders Fund. Throughout his career, Thiel has demonstrated an astute ability to identify and capitalize on emerging trends in technology and finance, shifting seamlessly from a background in securities law to a successful career as a derivatives trader. In recognition of his foresight and investment acumen, Thiel established Thiel Capital Management and Founders Fund, which serves as a platform for his continued exploration and investment in transformative technologies.
In 2017, Founders Fund made a bold move by investing a significant sum, between $15-20 million, in Bitcoin, which was a relatively new and highly speculative asset at the time. This strategic investment, which incurred significant reputational risk, ultimately paid off as Bitcoin's value skyrocketed, and the fund's holdings swelled to a staggering $1.8 billion. This move further solidifies Thiel's reputation as a visionary investor who is always on the lookout for the next big thing in the technology and finance space.
Let’s see what Thiel has said about Bitcoin over the years.
“I’m skeptical of most of them (cryptocurrencies), I do think people are a little bit … underestimating Bitcoin, especially because ... it’s like a reserve form of money, it’s like gold, and it’s just a store of value. You don’t need to use it to make payments.” - October 2017
“You’re supposed to just buy Bitcoin. I feel like I’ve been underinvested in it. I think the answers are still to go long on Bitcoin. Maybe it still is enough of a secret.” - October 2021
“We’re at the end of the fiat money regime. Price could increase by a factor of 100.” - April 2022
And after all of that, Founders Fund sold the vast majority of their entire cryptocurrency portfolio by the end of March, 2022.
Should we be mad at Peter Thiel for selling? I believe the answer is an obvious “no.”
It is understandable that his recent decision to sell a significant portion of his Bitcoin holdings has sparked controversy within the Bitcoin community. However, it is important to consider the nature of Thiel's role as an investor, as well as the principle of a store of value.
As the head of Founders Fund, Thiel has a fiduciary responsibility to maximize profits for his investors, and thus must make sound investment decisions in line with this goal. Prior to the decision to sell, Thiel had held and accumulated Bitcoin for eight years, and had spoken positively of the cryptocurrency. Furthermore, taking profits on investments is not a simple task, and Thiel's well-timed trade should not be met with criticism.
Additionally, it is crucial to remember that a store of value is only effective if it can be freely traded and sold as the holder sees fit. Bitcoin served its purpose for Thiel by accruing and storing value over time. To expect Thiel to hold onto his Bitcoin indefinitely would be unrealistic and potentially detrimental to the success of his fund.
Furthermore, Thiel's decision to praise Bitcoin in the wake of his sale should not be viewed as hypocritical. Praising an asset even after selling it is not inherently wrong, and Thiel took the risk of potentially missing out on gains or facing criticism for his statements. It is also important to note that Thiel's comments on Bitcoin may not have a significant impact on its price.
Thiel's decision to sell his Bitcoin holdings should not be viewed as a betrayal of the cryptocurrency or the broader community. Thiel has played a major role in advancing the payments industry and his support for Bitcoin should not be discounted. It is important to remember that investing is a fluid process, and Thiel may return to the market when the time is right.
Never forget that they love you when you buy and hate you when you sell.
Bitcoin Thoughts And Analysis
Bitcoin had one of it’s most bullish weekly candles ever last week, with an increase in 7 days of roughly 25% in price. That should be a sign of more bullishness to come, but nothing would surprise me.
As you can see, Bitcoin has recaptured the entirety of the FTX drop. That said, it’s struggling at the top of that move, around $21,473 (red line). Right now we have a wick above that line and candle trading below, which could be a sign of heavy selling liquidity in that area. That means we need to be cautious. This is called a bearish SFP.
As you can see from the blue checks, Bitcoin is still in a bear market, with a series of lower highs and lower lows. This would change with a break above $25,212.
Legacy Markets
S&P 500 contracts are struggling for direction as traders are concerned about hawkish central banks, worsening economic data, and earnings hiccups in the world's largest economy. Contracts on the S&P 500 and Nasdaq 100 were little changed even as the underlying gauges were poised for the biggest weekly losses since before Christmas. The Stoxx Europe 600 Index posted a modest rebound from the biggest loss in a month. Treasuries fell as investors weighed comments by US and European central bankers favoring higher interest rates. The dollar edged higher. Oil climbed on hopes for Chinese demand. Economic data this week pointed to an increased possibility of a US recession and global slowdown, but that didn't deter Federal Reserve or European Central Bank officials from reiterating their hawkish stance.
Key events on Friday:
US existing home sales, Friday
IMF’s Kristalina Georgieva and ECB’s Lagarde speak in Davos, Friday
Here are some of the main market moves:
Stocks
The Stoxx Europe 600 rose 0.3% as of 10:14 a.m. London time
S&P 500 futures were little changed
Nasdaq 100 futures rose 0.3%
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index rose 0.5%
The MSCI Emerging Markets Index rose 0.7%
Currencies
The Bloomberg Dollar Spot Index rose 0.2%
The euro was little changed at $1.0837
The Japanese yen fell 0.9% to 129.60 per dollar
The offshore yuan fell 0.2% to 6.7821 per dollar
The British pound fell 0.3% to $1.2351
Cryptocurrencies
Bitcoin was little changed at $20,951
Ether rose 0.4% to $1,551.12
Bonds
The yield on 10-year Treasuries advanced three basis points to 3.43%
Germany’s 10-year yield advanced six basis points to 2.13%
Britain’s 10-year yield advanced six basis points to 3.33%
Commodities
Brent crude rose 0.5% to $86.56 a barrel
Spot gold fell 0.2% to $1,929.06 an ounce
Stop Losses - The Basics
A stop loss is a risk management tool that is used in trading to limit potential losses on a trade. It is a type of order that automatically closes a trade at a certain price, known as the stop price, in order to prevent further losses. Setting a stop loss is an important part of managing risk in trading and can help traders avoid large losses. In this post, we will discuss how to set a stop loss, including using technical analysis to determine levels for stop loss.
Determine the stop loss level
The first step in setting a stop loss is determining the stop loss level. This is the price at which you want to close the trade in order to limit your potential loss. A common method for determining a stop loss level is to use a percentage of the entry price. For example, if you enter a trade at $100 and want to limit your potential loss to 5%, your stop loss level would be $95.
Another way to determine the stop loss level is by using technical analysis. Technical analysis is the study of past market data, primarily price and volume, to identify patterns and make trading decisions. By analyzing chart patterns, support and resistance levels, and indicators, traders can determine potential levels for stop loss.
For example, if a trader identifies a key support level on a chart and believes that the market will not fall below that level, they may set their stop loss just below that level. This way, if the market does fall below that level, the trader's stop loss will be triggered and the trade will be closed, limiting their potential loss.
Decide on the type of stop loss order There are several different types of stop loss orders, each with its own advantages and disadvantages. The most common types are:
Basic stop loss: This is the most basic type of stop loss order. It is placed at a specific price level and will close the trade if the market reaches that level.
Trailing stop loss: This type of stop loss order moves with the market. For example, if you enter a trade at $100 and place a trailing stop loss of 5%, the stop loss level will move up with the market. If the market rises to $105, the stop loss will also move up to $100.
Time stop loss: This type of stop loss order is based on time rather than price. It will close the trade after a certain period of time, regardless of the market price.
Place the stop loss order
Once you have determined your stop loss level and chosen the type of stop loss order, you can place the order. This can be done through your trading platform, where you will be prompted to enter the stop loss level and the type of order.
Monitor the trade
Once the stop loss order is placed, it is important to monitor the trade, but not to change your plan. If the market reaches the stop loss level, the trade will be closed and your loss will be limited. It is also important to review your stop loss levels regularly to ensure that they are still appropriate for the current market conditions.
Setting a stop loss is an important part of managing risk in trading. It allows traders to limit potential losses and protect their capital. By determining the stop loss level, choosing the appropriate type of stop loss order, and monitoring the trade, traders can effectively use stop loss orders to manage their risk. Using technical analysis to determine levels for stop loss is an effective method for finding appropriate levels for stop loss, it can help traders to make more accurate decisions and have a more structured approach to risk management. It is important to remember that stop loss is just one tool among many and it should be used in conjunction with other trading strategies to maximize your chances of success.
Will FTX Make A Comeback?
When asked about the possibility of restarting FTX, new CEO John Ray III responded, "Everything is on the table." According to a report from the Wall Street Journal, a task force is already exploring the possibility, which could rescue more assets. The purpose of restarting the exchange would be to recover more than what selling the platform or liquidating the assets could achieve. It may be difficult to imagine customers returning to FTX with their personal finances, but the possibility cannot be ruled out. FTX was a good product, but it may require a new name at this point.
Jamie Dimon’s Thoughts On The Market
Cathie Wood's thoughts on the market, which I discussed yesterday, contrast nicely with Jamie Dimon's. Wood predicts Bitcoin will hit $1m by 2030, believes there is a "wall of worry," and is preparing for deflation. Jamie Dimon, on the other hand, criticizes Bitcoin, embodies worry, and feels as though there is more underlying inflation. Let's see what Jamie Dimon recently said in an interview:
"I actually think rates are probably going to go higher than 5% ... because I think there's a lot of underlying inflation, which won't go away so quick. I know there are going to be recessions, ups, and downs. I really don't spend that much time worrying about it. I do worry that poor public policy damages American growth." As you can tell, Mr. Dimon's approach is quite the opposite of Ms. Wood's.
Dragonfly Capital Is Bullish On Ethereum
Haseeb Qureshi, a managing partner at Dragonfly Capital said the following in an interview about Ethereum.
“If you want to get to a trillion-dollar coin, it’s not going to happen on the back of retail. You need institutional buyers to buy this in size and Ethereum is the only game in town if you want institutional buyers. Given Bitcoin’s ESG consequences and the ESG criterion, it will be harder and harder for institutions to have the ability to buy Bitcoin and not have to answer questions about it. ESG is becoming a bigger concern and institutions want to invest in crypto, that’s why crypto is moving to proof-of-stake.”
Ethereum is miles ahead of the competition and institutions are just starting to realize this.
Google Firing 6% Of Employees
Google parent company, Alphabet, has announced that it will cut around 12,000 jobs, which is more than 6% of its global workforce, due to a slowdown in digital advertising and trailing behind its competitors in the cloud-computing division. This move makes Google the latest tech giant to retrench after years of abundant growth and hiring, joining a host of other tech companies such as Meta Platforms, Twitter and Amazon that have also drastically scaled back operations amid a faltering global economy and soaring inflation. Google CEO Sundar Pichai said in an email to employees that the company has a "substantial opportunity in front of us" with artificial intelligence, which is a key investment area where Google is facing a surge in recent competition.
Why am I sharing this? Because much ado continues to be made about layoffs in the crypto industry, but this is a widespread phenomenon across tech, and large companies in general.
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.