The Wolf Den #695 - Bitcoin's Time To Shine
Short The Bankers, Long Bitcoin
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In This Issue:
Bitcoin's Time To Shine
Epic Twitter Spaces Tomorrow!
Bitcoin Thoughts And Analysis
Legacy Markets
The Million Dollar Bitcoin Bet
USDC Held Strong
How Rich People Avoid Paying Taxes | KC Chohan, Founder & CEO of Together CFO
Bitcoin's Time To Shine
Taking occasional breaks from the crypto world is a little-known life hack that can add a few years back to your life. So, when I packed my bags last week to leave our bubble for a much anticipated vacation, I never expected to return with more gray hair on my head.
What a week to take off!
I imagine that many of you have already heard about what took place last week, given the amount of time that has passed and the constant news coverage. But let me quickly summarize the situation. What we just witnessed was more than just the early signs of financial collapse. The Fed's crusade to raise rates and fight inflation has finally backfired, and the central bank is almost entirely to blame. And the worst part about all of this is that you and I will pay the price.
When I left last week, the main story was the lack of institutions left to bank the U.S. crypto ecosystem, I thought we would see that story spiral out of control. What I didn't expect was for legacy banks to fall like dominos from entirely non-crypto events, while crypto stood strong. How ironic is it that after regulators back our industry's banks into a corner, their 'protected' banking monopoly begins to crumble while their focus is on us?
When you point one finger, there are three fingers pointing back to you.
We are currently witnessing a level of stress on the financial system that has not been seen since 2008. The second-largest bank failure in U.S. history just occurred (and the third!), consumer confidence has hit an all-time low, deposits to tier-1 banks are at an all-time high, regional bank stocks are plummeting, bond volatility is exceptionally high, the fed funds rate is bouncing like a ball, international banks are calling for support, and Moody's has cut the outlook for the entire banking system. Oh, and did I mention that QE is back?
We have been saying for a long time that the financial system is broken, and now we have reached a point where we can no longer deny it.
Let's clarify a few things about what is happening. Nothing about the current collapse of our financial and economic system is political, as some pundits may want you to believe. This is not the fault of reckless VCs or banking wokeness. This is not a red or blue issue; it is a central bank issue. Sure, everyone and everything plays a part to some extent, but inflating the money supply by 80% in two years is not conducive to monetary stability. It's a suicide pill.
With a complete lack of monetary stability, what was once considered safe is no longer the case. You may have already heard mention of the banking system splitting into a tiered system, and that analysis is correct. As I see it, there are a handful of tier-one banks such as JPMorgan, Bank of America, Wells Fargo, and Citigroup. These banks carry implicit guarantees on your deposits. And then there are tier-two banks like Signature and Silicon Valley Bank that carry explicit guarantees on your money. Beyond tier-one and tier-two is everyone else, and the truth is that no bank is 100% safe.
Does this sound hyperbolic? Yes. But that doesn’t mean it isn’t true.
After last week's breakdown, it's impossible to determine what is genuinely 'safe' in this new world order. The Fed has announced the BTFP, but is it enough? Now, all eyes are on Credit Suisse, headquartered in Zurich but with a massive operation in the U.S. It is twice the size of Silicon Valley Bank and almost five times the size of Signature. They just announced a massive bailout, led by UBS but backed by the full strength of Switzerland.
This isn’t over.
So, what do we do? First off, spreading your savings across multiple banks to ensure the $250,000 deposit insurance won't help if there's a banking crisis. In the event of a banking crisis, even if you have access to your fiat, it will be worth significantly less. I want to be clear that I am not calling for doomsday at the moment, but the system is undoubtedly at a major crossroads. If the Fed plays its cards right, it can continue to kick the can further down the road, but I expect this week to be an interesting one. The Fed will be announcing another rate hike, a pause or a cut.
I personally don't want to see any more banks fall, but I also don't want to see my children saddled with further issues to deal with. It will only cause more pain. QE is not the answer, and neither is forcing a collapse.
If you've made it this far, then here's what I'm trying to say - GO BUY BITCOIN! I'm not claiming that Bitcoin will be the immediate beneficiary of an imminent banking collapse, but it will still serve its intended purpose. Trust in the system took its most significant hit last week since 2008, and Bitcoin is one of the last remaining assets on the planet that we can trust. Time is running out quickly, and I hope you own some hard money.
Epic Twitter Spaces Tomorrow!
Michael Saylor is joining a Twitter Space with me tomorrow at 11:00 am EST. Balaji may be joining as well. The link to join is attached to the image, you won’t want to miss this.
Bitcoin Thoughts And Analysis
Bitcoin has one of its bigger bullish weekly candles ever. What a time to take a vacation!
The bear market is officially over. Bitcoin made its first higher high ($25,212) since the all time high at $69,000. That confirms the end of the bearish trend. Price can still go down, but that would be a new trend, not a continuation of the previous bear market.
Congrats everyone.
I shared the same idea in 2019, when price broke the bear trend and raged to $14,000.
Many people will argue that macro looks bad (it does), that a single event could send price down again (it could). But there are rules to technical analysis. A macro higher high breaks the bear trend. That is the rule. This is not arbitrary or opinion.
As you can see by the blue checks, we also have a new confirmed bullish trend of higher highs and higher lows. We want to see that remain intact.
Both the 50 and 200 MAs are finally broken, so we should look for an eventual retest as support. The 200 MA aligns with the key area at $25,212, so look for that area as a dip worth considering if we see price retrace some of this move. That would be very bullish - seeing key resistance retested as support.
$28,600 is now the key resistance. That was the exact low of the 2021 market retracement, and the exact top of this move so far.
For now, Bitcoin does not look like it wants to give these dips. It is raging upwards in the face of a wobble in the banking system - exactly what Bitcoiners have been predicting forever.
What a week.
As anticipated, the break of $25,212 sent price flying straight to the $28,000 area. Now price is reaching a strong zone of resistance, which is drawn generally and not at a specific level.
You can see the $28,600 area drawn on the weekly chart above.
Legacy Markets
European stocks and US equity futures fell due to concerns over the health of the banking system after the emergency sale of Credit Suisse Group AG to UBS Group AG over the weekend. The Stoxx Europe 600 index dropped 0.7%, while UBS shares fell 16% and Credit Suisse sank 60%. Investors turned to safe assets, leading to gains in Treasuries and gold. Policymakers are working to restore confidence after the issues at Credit Suisse and the collapse of Silicon Valley Bank raised concerns over financial stability. Central banks announced coordinated actions to boost liquidity in US dollar swap arrangements. The banking system's stress indicates a possible painful end to the bear market in US stocks, with the S&P 500 remaining unattractive until the equity risk premium climbs significantly.
Key events this week:
ECB President Christine Lagarde appears before European Parliament’s economic committee, Monday
US existing home sales, Tuesday
US Treasury Secretary Janet Yellen to appear at Senate subcommittee hearing, Wednesday
FOMC rate decision, news conference from Chair Jerome Powell, Wednesday
EIA crude oil inventory report, Wednesday
Eurozone consumer confidence, Thursday
BOE interest rate decision, Thursday
Swiss National Bank rate decision and press conference, Thursday
US new home sales, initial jobless claims, Thursday
US Treasury Secretary Janet Yellen testifies to a House Appropriations subcommittee, Thursday
Eurozone S&P Global Eurozone Manufacturing PMI, S&P Global Eurozone Services PMI, Friday
US durable goods, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 fell 0.4% as of 9:35 a.m. London time
S&P 500 futures fell 0.2%
Nasdaq 100 futures were little changed
Futures on the Dow Jones Industrial Average fell 0.3%
The MSCI Asia Pacific Index fell 1.1%
The MSCI Emerging Markets Index fell 0.9%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0666
The Japanese yen rose 0.6% to 131.06 per dollar
The offshore yuan was little changed at 6.8894 per dollar
The British pound rose 0.2% to $1.2195
Cryptocurrencies
Bitcoin rose 1.2% to $28,315.03
Ether fell 0.5% to $1,789.9
Bonds
The yield on 10-year Treasuries declined nine basis points to 3.34%
Germany’s 10-year yield declined nine basis points to 2.02%
Britain’s 10-year yield declined eight basis points to 3.20%
Commodities
Brent crude fell 2.1% to $71.41 a barrel
Spot gold rose 0.1% to $1,991.80 an ounce
Announcement
Over the next couple of days, I will do my best to catch up on crypto news and continue covering the most current news. Putting it all here would be overkill.
The Million-Dollar Bitcoin Bet
For those unfamiliar with Balaji Srinivasan, he is no idiot. His resume is about as good as it gets. Balaji is the former CTO of Coinbase and a former partner at venture capital firm Andreessen Horowitz. His recent million-dollar bet is not about making money.
While Balaji was already well-known in the crypto space, he has now become the talk of the town. In case you missed it, Balaji publicly bet that Bitcoin would reach $1m in 90 days - pretty ridiculous, right? He could have easily taken a better bet with someone else or opened an options or futures contract, but he didn't. Balaji has other intentions.
Sure, to some extent, this is a million-dollar engagement farm, but ideas are powerful, and Balaji has effectively created an incredible advertisement for Bitcoin - he is doing this for all of us. While I am quite confident that Balaji will lose this bet, he will win in terms of raising massive awareness for Bitcoin at just the right time. It doesn't make sense to ridicule his decisions here.
To some people, this bet is a top signal, but Balaji isn't just tossing around a meme and calling it a day. This isn't laser eyes 2.0. Balaji is making the argument that basically all banks are insolvent, and Bitcoin is the only way to save your money. If Balaji is right, the world will look very different. At least this time, our hopium campaign is backed by facts and not just price predictions.
What I appreciate about how this story ends is that a smart contract is needed to make the bet as honest as possible. The world doesn't just need Bitcoin; it also needs Ethereum.
USDC Held Strong
After last week's events in the banking industry, the entire crypto ecosystem should give itself a pat on the back. It has always been a concern that crypto would infect the legacy system with its contagion, but now that everything has been flipped upside down, the concern is the legacy system contaminating crypto - go figure.
In case you missed it, USDC lost parity last week and briefly fell to $0.86. For those who watched it happen, let's not pretend like we weren't all a little shaken. When SVB collapsed, we learned that Circle had exposure, but for a brief while, we didn't know how much. As the panic was ensuing, Coinbase and Binance temporarily paused USDC conversions.
By the numbers, Circle holds about 25% of its USDC reserves in cash and the rest in short-dated US treasuries. Circle's exposure to SVB was $3.3 billion of its $40 billion held in cash. Fears subsided now that we know the capital will slowly be returned thanks to the backstop, but if Balaji is right, Circle and the rest of the world are in big trouble.
To tie this news to the Balaji bet, if hyperinflation happens, short-term treasuries become very risky assets. Liquidity is trapped, the dollar loses value, assets could be frozen, Circle would be in trouble, and crypto contagion would be immense. Crypto folks rooting for hyperinflation are not realizing the consequences that could come. Let's not pray for doomsday.
How Rich People Avoid Paying Taxes | KC Chohan, Founder & CEO of Together CFO
KC Chohan is the Founder & CEO of Together CFO, a tax advisory firm specializing in tax strategy for high-net-worth families. In this episode, KC shares his expertise on tax planning and provides insights on how wealthy individuals can protect their wealth and reduce taxes. He also offers advice for those interested in tax savings, emphasizing that significant wealth is typically required to implement such strategies effectively.
In this episode with KC, we discussed:
Minimizing taxes
Charities
Not selling
Loans and interest rates
How much money do you need
What to do with crypto?
Own nothing control everything
Passing generational wealth tax-free
Trust vs personal taxes
CBDC disaster
The cost to set up the trust
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.
The world also needs ETH🤣