The Wolf Den #668 - Your Plan Is Your Life Raft
Fail To Plan - Plan To Fail
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In This Issue:
Your Plan Is Your Life Raft
Bitcoin Thoughts And Analysis
Legacy Markets
This Is A Big Week
Major German Bank Now Offers Crypto Services
Core Scientific Gets Bailed Out
UK Gets Serious About Crypto Regulation
J.P. Morgan, Birthplace Of Decentralized Crypto? | Stuart Popejoy, Kadena
Your Plan Is Your Life Raft
I sound like a broken record, but I still can’t say this enough - make a plan for trading or investing and stick to it as if your life depends on it. That’s the motto for today, tomorrow, and the next 5 years. Tattoo it on your chest or write it on your bathroom wall. Just Don’t Forget It. EVER.
Markets are designed to separate you from your plans. And your money. Without a plan, your chances of survival are slim to none. And slim just walked out the door.
A well-constructed plan serves as a roadmap, providing stability and direction amidst market volatility. It is your life raft.
Despite the abundance of literature available on the topic of the ideal plan, it can be challenging to make sense of the various conflicting philosophies and data sets.
The end result is that investors often throw up their hands and say “F&$K it - I’ll just buy low and sell high.” This strategy is flawed as it fails to account for the multitude of variables that can impact market behavior.
Planning to “buy low” is a fool’s errand. These are the investors that swear Bitcoin will drop to $10,000 this cycle and promised us Bitcoin was headed to 3-figures back in 2018. Every now and then this group is right, but by the time price actually falls to their predicted level, they are under a new spell - calling for even lower prices.
Let’s see what this looks like in reverse.
Investors planning to “sell high” are the ones who swear every cycle will end in a super cycle. In 2017, these investors believed Bitcoin was headed to $100,000 and in 2021, they were convinced it was headed to $200,000 to +$500,000. Once this group starts to get the taste of being right, price is like a drug. The high from their “correct” prediction is so irresistible, it’s impossible to get off the bus. One more “high” literally and figuratively is all that matters until price leaves them in the dust as they too are under a spell of greed.
We are all guilty of succumbing to these lines of thought. The important thing is to learn enough to overcome this temptation or fight it, and edge out a win. That is where a plan comes in. A plan is effective because success is not determined by your ability to "buy low" or "sell high," but by sticking to your initial rational thoughts and following through with what you planned to do, even when you become emotional and irrational. A plan enables you to maintain your convictions amidst alluring temptations. Temptation is most likely to be strong at the same time when it is crucial to stick to your plan.
So does this mean that your plan is set and stone and you can never deviate?
Absolutely not.
Markets are constantly evolving and require us to reassess our investment strategy. That's why I write this newsletter every day, and my ideas shift along with the market. Adaptability is crucial, but some principles must remain constant. For example, I have a plan to never invest more than a certain percentage of my net worth and to trade with a specific percentage of it. However, I am open to modifying my approach when it comes to where I place my trust in this space. There's a lot that can be debated about what should change versus what should remain unchanged, but for now, I suggest you focus on creating a plan for the bull market.
The bear market is slowly fading, which means new opportunities for temptation are just around the corner. So, while we still have the chance, form a plan now so you won't be caught off guard. Your plan is your life raft in the investing game. It's crucial to have a plan in place to help you navigate through the rough waters.
Bitcoin Thoughts And Analysis
The crypto market is in an interesting spot. Volatility is expected today when the FOMC announces the next rate hike. I was concerned about bearish divergence coming out of overbought conditions, which I am seeing on a majority of crypto charts. That said, most of them also printed hidden bullish divergence yesterday, which effectively “cancels” the bullish divergence. These coins are largely still overbought and will eventually hit oversold, but it’s beginning to feel like the dips will continue to be shallow.
Legacy Markets
Stocks in Europe increased while US equity futures declined due to multiple risks including economic data, company earnings, and the Federal Reserve policy meeting. The Stoxx Europe 600 index rose modestly after a report showed lower-than-expected inflation in the euro area. The S&P 500 and Nasdaq 100 futures declined after a strong January rebound. The global stock market excluding the US is experiencing a record-breaking 8.6% gain in January. Equity markets are facing a challenge from the Federal Reserve, as traders expect a pivot from Chair Jerome Powell and his colleagues. Despite improved inflation and a tight job market, the Fed may not alter its tone just yet. The dollar remained steady and Treasury yields decreased ahead of the Fed statement. Adani Group stocks resumed their selloff after the share sale failed to improve sentiment. Bitcoin has increased by 40% this year and is being tested ahead of the Fed decision. Iron ore remains near a seven-month high and oil has edged higher.
This Is A Big Week
This is arguably the biggest week of the year for markets, with the combination of earnings and rate decisions.
Key events this week:
US construction spending, ISM Manufacturing, light vehicle sales, Wednesday
FOMC rate decision, Fed Chair Jerome Powell press conference, Wednesday
Earnings Wednesday include: Meta Platforms and Peloton Interactive
Eurozone ECB rate decision, President Christine Lagarde press conference, Thursday
UK BOE rate decision, Thursday
US factory orders, initial jobless claims, US durable goods, Thursday
Earnings Thursday include: Alphabet, Apple, Amazon, Qualcomm and Deutsche Bank and Santander
Eurozone S&P Global Eurozone Services PMI, PPI, Friday
US unemployment, nonfarm payrolls, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 rose 0.2% as of 10:11 a.m. London time
S&P 500 futures fell 0.4%
Nasdaq 100 futures fell 0.3%
Futures on the Dow Jones Industrial Average fell 0.5%
The MSCI Asia Pacific Index rose 0.8%
The MSCI Emerging Markets Index rose 1.1%
Currencies
The Bloomberg Dollar Spot Index fell 0.1%
The euro rose 0.2% to $1.0890
The Japanese yen rose 0.1% to 129.91 per dollar
The offshore yuan rose 0.2% to 6.7443 per dollar
The British pound was little changed at $1.2319
Cryptocurrencies
Bitcoin rose 0.2% to $22,995.16
Ether fell 0.2% to $1,574.15
Bonds
The yield on 10-year Treasuries declined three basis points to 3.48%
Germany’s 10-year yield was little changed at 2.28%
Britain’s 10-year yield declined two basis points to 3.31%
Commodities
Brent crude was little changed
Spot gold fell 0.2% to $1,925.08 an ounce
Major German Bank Now Offers Crypto Services
Institutional investors in Germany seeking exposure to cryptocurrencies will soon have a new option. Upon obtaining regulatory approval, DekaBank, a leading German lender with $390 billion in assets under management, will offer crypto services to its institutional clients. To lead the initiative, DekaBank has chosen Swiss services provider Metaco for its extensive experience as a custodian in the digital asset space.
"Digital assets represent a crucial aspect of the future and a revolutionary way for assets to be represented, from currencies to real estate," said a representative from DekaBank. "Today, we take another important step in laying the foundation for giving our institutional investors and millions of people in Germany access to this transformative opportunity."
Core Scientific Gets Bailed Out
Core Scientific, one of the largest Bitcoin miners in the world, announced in October that it would be unable to make payments and was preparing for bankruptcy and lawsuits. The news led to concerns about contagion spreading into the mining sector, and it appeared that Core Scientific would have a difficult time recovering unless it secured an emergency loan.
Fortunately, Core Scientific has now announced that it has reached a $70 million loan agreement with B. Riley, pending court approval. If approved, the loan is expected to provide "up to 15 months of runway and significant flexibility" as it has "no plan-related milestones and is not conditioned on seeking approval of any specific Chapter 11 plan."
UK Gets Serious About Crypto Regulation
From the article:
“The government will set out ambitious plans to robustly regulate cryptoasset activities – providing confidence and clarity to consumers and businesses alike
Consultation proposals include strengthening rules for crypto trading platforms and a robust world-first regime for crypto lending
Announcement delivers on financial services roadmap by embracing technological change and innovation, delivering on the Prime Minister’s plan to grow the economy
Ambitious plans to protect consumers and grow the economy by robustly regulating cryptoasset activities have been announced by the government.
Cryptoassets – commonly known as ‘crypto’ – are a relatively new, diverse and constantly evolving class of assets that have a range of potential benefits, as well as posing risks to the consumer.
As is common in emerging technology markets, the crypto sector continues to experience high levels of volatility and a number of recent failures have exposed the structural vulnerability of some business models in the sector.
Our robust approach to regulation mitigates the most significant risks, while harnessing the advantages of crypto technologies. This enables a new and exciting sector to safely flourish and grow, boosting jobs and investment.
Economic Secretary to the Treasury, Andrew Griffith said:
“We remain steadfast in our commitment to grow the economy and enable technological change and innovation – and this includes cryptoasset technology.
“But we must also protect consumers who are embracing this new technology - ensuring robust, transparent, and fair standards.”
Under plans set out by the government today (1 February), it will seek to regulate a broad suite of cryptoasset activities, consistent with its approach to traditional finance.
These proposals will place responsibility on crypto trading venues for defining the detailed content requirements for admission and disclosure documents – ensuring crypto exchanges have fair and robust standards.
The proposals will also strengthen the rules around financial intermediaries and custodians – which have responsibility for facilitating transactions and safely storing customer assets. These steps will help to deliver a robust world-first regime strengthening rules around the lending of cryptoassets, whilst enhancing consumer protection and the operational resilience of firms. As part of this approach, the consultation will seek views on improving market integrity and consumer protection by setting out a proposed crypto market abuse regime.
In addition, to address industry concerns about the small number of Financial Conduct Authority (FCA) authorised cryptoasset firms who can issue their own promotions, HM Treasury is also introducing a time limited exemption. Cryptoasset businesses that are registered with the FCA for anti-money laundering purposes will be allowed to issue their own promotions, while the broader cryptoasset regulatory regime is being introduced.
This approach delivers on the original policy intention of the measure to promote innovation, enhance consumer protection and ensure that cryptoasset promotions can be held to equivalent standards as promotions of financial services products with similar risk profiles.
Further information
Today’s consultation (published 1 February) will close on 30 April 2023, after which, the government will consider feedback and work to set out its consultation response. Once legislation is laid, the Financial Conduct Authority will consult on its detailed rules for the sector
In April 2022, the then Economic Secretary, John Glen MP, set out ambitious plans for the UK to become a global hub for cryptoasset technology
Today’s announcement delivers against these plans, positioning the UK as a safe jurisdiction for cryptoasset activity to take place, fostering innovation and providing firms clarity over the planned regulatory framework.
The consultation builds on previous HM Treasury proposals, which focused on stablecoins and the financial promotion of cryptoassets
Proposals are centred around a number of important cryptoasset activities – including exchange activities, custody activities and lending activities, which the government is intending to bring into the regulatory perimeter for financial services
For each activity the consultation sets out key design features of the regime covering themes such as prudential requirements, data reporting, consumer protection, location policy and operational resilience
The consultation paper also proposes regimes for a range of cross-cutting issues which apply across cryptoasset activities and business models, including market abuse and cryptoasset issuance and disclosures
Future financial services regulatory regime for cryptoassets consultation - GOV.UK (www.gov.uk)
J.P. Morgan, Birthplace Of Decentralized Crypto? | Stuart Popejoy, Kadena
Stuart Popejoy is an interesting character. After getting a degree in Comparative Literature, he started his career as a programmer at Apple and then moved to designing and building trading systems, which led to a top management role at J.P. Morgan, where he was responsible for JPM Coin. Shortly after Stuart launched Kadena, a layer 1 blockchain, and created PACT, a smart contract language. We talked about all things crypto: Kadena, private blockchains, the next killer app, the role of SEC, the advantages of proof-of-work and more!
In this episode with Stuart, we discussed:
JP Morgan background
Private blockchains
Kadena
Choosing PoW
True decentralization
Blockchain’s killer app
Multisig
Damage from crypto
SEC is a political organization
The next driver
The views and opinions expressed here are solely my own and should in no way be interpretedd 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.