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In This Issue:
The Pain To Pleasure Ratio
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
Another Wallet Hacked
Legislators Make Progress
Gate.io Rumors
Coinbase Launching Institutional Futures… Today
Why This $1.3 Trillion Asset Manager Is Bullish On Bitcoin | Sandy Kaul, Franklin Templeton
The Pain To Pleasure Ratio
Successful crypto investing is a test of one’s pain tolerance. To win, investors must endure the hardships of a predominantly downward or sideways market while still making correct decisions. It’s my hunch that no other market on the planet demands the unwavering resilience required of a crypto investor.
To probe further into this notion, I examined the preceding 4-year Bitcoin cycles, specifically 2013, 2017, and 2021, calculating the days an investor hypothetically toggled between pain and pleasure. This is a subjective domain to explore, yet with some rudimentary definitions and assumptions, it can be quantifiably accomplished. The premise is straightforward: a day is identified as either 'pleasurable' or 'painful' based on the following definitions.
Pleasure - All the days in which the preceding cycle's All-Time High (ATH) is outdone until a new ATH is created.
Pain - All the days during which price is striving to establish a new cycle ATH. (We currently fall into this category until BTC surpasses $69,000)
Basic assumptions
Every cycle comprises mini-cycles that proffer brief flashes of pleasure within a duration of pain, and vice-versa. For the sake of simplicity, we will overlook this.
Seasoned investors might perceive the months leading up to new ATHs as pleasurable, but the majority are just embarking on their journey and are on the verge of financial ruin. Most participants enter the market during a sharp price ascent, which accounts for the steep increase.
Each individual has their unique timeline of 'pleasure' and 'pain.' An investor who impeccably times market highs and lows experiences only pleasure and no pain, and vice versa. These extreme cases do not portray the norm, which is why I will stick to the basic definitions outlined above, to encapsulate the experiences of most investors.
Equipped with these definitions and assumptions, I encourage you to scrutinize the image below and contemplate why it could potentially be misleading. I assure you I will soon present my argument, I am merely setting the scene.
Examining cycles through this perspective may mislead investors into presuming that crypto is mostly on an upward trajectory. Anyone who has been around for at least one complete cycle knows that temporary pleasure is usually followed by enduring pain; I have the numbers to substantiate this assertion, so let's delve into some math.
The 2013 Cycle
Now, we arrive at the heart of the matter — Bitcoin reached an ATH in late 2013, hitting approximately $1,154. It wasn't until early 2017 that this ATH was exceeded. Between these two periods (late 2013 to early 2017), there were 1,127 days, which we can classify as 'pain' because the price was endeavoring to establish a new ATH. Following this phase of 'pain,' Bitcoin set a new ATH in late 2017, which took 334 days to achieve, we can classify these days as 'pleasure.'
There were 1,127 days of pain and 334 days of pleasure.
This translates to 3.34 days of pain for every day of pleasure.
Our pleasure-to-pain ratio is 1 to 3.34.
The 2017 Cycle
Moving forward, we can simplify the mathematics. For the 2017 cycle:
There were 1,410 days of pain and 335 days of pleasure.
This translates to 4.2 days of pain for every day of pleasure.
Our pleasure-to-pain ratio is 1 to 4.2.
The 2021 Cycle
If you were anticipating a third dataset, unfortunately, it doesn't exist. Currently, we are still accumulating days in the 'pain' category, at around 581 days and counting. This means there are currently no 'pleasure' days to count, but they will eventually come. I could have ventured further back in history, but prices from the distant past lack historical reliability, and the 4-year cycles were not yet formed. Despite Bitcoin appearing to move 'up only,' days of pain have consistently outnumbered days of pleasure - don't let oversimplified technical analysis make you think otherwise.
As a long-term investor, it's wise to brace yourself for more days of pain than pleasure. This measured approach will boost your chances of surviving from one cycle to the next considerably. And if you do manage to pull off a few well-timed trades, then it's a win-win.
Now, let's draw some conclusions.
The first one is that we can likely expect there to be somewhere between 3 to 4 days of 'pain' for every 'pleasure' day in the remainder of this cycle. This doesn't mean that Bitcoin has to endure 500+ more days of 'pain' to achieve this ratio, it just means the days of 'pleasure' will be proportional to the days of 'pain.'
For example, if Bitcoin were to surge to its ATH rather swiftly and shift to 'pleasure’ - let's say it happened in 30 day - we could probably expect the 'pleasure' phase to be short-lived. The proportion of pain to pleasure would likely still remain intact.
The second conclusion is that the longer we experience 'pain,' the longer we can expect to experience 'pleasure.' It might feel like this bear market is taking forever to recover, but we haven't even lasted half of the time it took for the 2017 ATH to return in late 2020, which took 1,410 days! It’s been 581 days since the last ATH, so expand your timeline if you are growing impatient.
The final conclusion, as mentioned at the outset of this article, is that success requires a rather significant tolerance for pain. All markets correct, but crypto in particular is volatile, impulsive, emotional, operates 24/7, and is still in its infancy. It's challenging to reconcile the belief that we are part of something transformative yet painful at the same time, but that’s the journey of an investor. An inability to balance these two realities is why so many investors fail to last from one cycle to the next.
Only the resilient endure.
The best advice I can offer is to do whatever it takes to hold on. The market is designed to shake you out, so defend your financial stability at all costs.
Bitcoin Thoughts And Analysis
BORING. We all know that Bitcoin is still doing nothing, right? Don’t get fooled by twitter, there’s nothing to see here for the moment. Maybe that can lead to more altcoin action, especially for ETH. See below.
Still watching the red 200 MA here on the weekly.
Altcoin Charts
Just a update from last week. ETH has now tapped the descending blue resistance. While this is not the time to buy, we should be watching for a breakout. This could be a great signal that ETH is poised to continue outperfoming and make a significant move up.
For now, it is at resistance.
Legacy Markets
Oil prices have risen following Saudi Arabia's commitment to reducing supply. Despite last week's significant rally, U.S. stock futures are showing uncertainty as the S&P 500 teeters on the verge of a bull market.
Crude futures have increased by approximately 2%, and shares from Shell Plc and BP Plc have bolstered European stock benchmarks. Saudi Arabia has announced an additional 1 million barrel-a-day supply cut planned for July, which will bring its production to a multi-year low.
In U.S. markets, Treasury yields are on the rise, and the dollar is gaining strength against all its G10 counterparts. There's growing speculation that the Federal Reserve may maintain steady interest rates in June, but might consider rate hikes later.
In Japan, stocks continue to surge, with the Nikkei 225 experiencing a 2.2% increase, as investors anticipate the weak yen will enhance corporate profits. Morgan Stanley strategists express optimism for equities in Japan, Taiwan, and South Korea, but foresee a sudden drop in corporate earnings impacting U.S. stocks.
Tech stocks in the U.S. have shown early signs of weakness, with futures for the Nasdaq 100 Index dipping by 0.3%.
Key events this week:
US factory orders, ISM services, Monday
ECB President Christine Lagarde appears in European Parliament, Monday
Rate decisions in Australia, Poland, Tuesday
China forex reserves, trade, Wednesday
US trade, consumer credit, Wednesday
Canada rate decision, Wednesday
EIA crude oil inventory data, Wednesday
Eurozone GDP, Thursday
Rate decisions in India, Peru, Thursday
Japan GDP, Thursday
US wholesale inventories, initial jobless claims, Thursday
China PPI, CPI, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 was little changed as of 10:30 a.m. London time
S&P 500 futures were unchanged
Nasdaq 100 futures fell 0.3%
Futures on the Dow Jones Industrial Average rose 0.1%
The MSCI Asia Pacific Index rose 0.5%
The MSCI Emerging Markets Index rose 0.1%
Currencies
The Bloomberg Dollar Spot Index rose 0.2%
The euro fell 0.1% to $1.0693
The Japanese yen fell 0.3% to 140.32 per dollar
The offshore yuan fell 0.3% to 7.1336 per dollar
The British pound fell 0.4% to $1.2397
Cryptocurrencies
Bitcoin fell 1.7% to $26,793.61
Ether fell 1.8% to $1,871.19
Bonds
The yield on 10-year Treasuries advanced four basis points to 3.74%
Germany’s 10-year yield advanced five basis points to 2.36%
Britain’s 10-year yield advanced five basis points to 4.21%
Commodities
Brent crude rose 1.3% to $77.43 a barrel
Spot gold fell 0.3% to $1,941.57 an ounce
Another Wallet Hacked
Yet another crippling crypto assault has transpired, this time impacting over 5 million users globally, with potential losses mounting to an estimated $50 million. Presently, there is no concrete information regarding the methods of the hack or the identity of the perpetrators, only a rising tally of pilfered funds. The timing is especially unfortunate, as users have just begun migrating away from Ledger in search of alternatives. This underscores the caution I expressed against impulsively abandoning a wallet based on transient sentiments.
Atomic Wallet, which promotes itself as a non-custodial decentralized wallet, has likely attracted a considerable influx of new users in recent weeks. The most distressing aspect of this incident is that the majority of victims will probably never recover their lost funds. According to Atomic Wallet's Terms of Service, “under no circumstances will Atomic Wallet be liable to you for any damages arising out of the services exceeding $50.” It is my hope that the lost funds are retrieved. Please exercise extreme caution when determining how to secure your crypto - this is an all-or-nothing decision.
Legislators Make Progress
We're starting to see some promising signs of positive change in crypto regulation, but let's not get ahead of ourselves. More information should be available soon. For now, there's a draft bill in Congress that aims to address some of the key challenges in the crypto world. This draft bill is trying to clarify the roles of the SEC and CFTC, provide some explanations around the Hinman Test (the test about how decentralized a system needs to be), outline guidelines for stablecoins, and propose frameworks for exchange reporting.
My summary here is quite broad because there's a good chance things could change significantly at this stage, so delving into the minutiae may not be useful. Additionally, the bill doesn't provide any additional funds for the SEC and CFTC to manage crypto oversight, which might create hurdles for the bill's passage. The Democrats haven't given their thoughts on it yet, and that could result in major revisions if other factors come into play. If the bill does get passed in its current form, we might see an end to Gensler’s tough approach, and the U.S. could work towards reaffirming its position as a leader in the crypto sphere.
While I'm not celebrating just yet, this development has the potential to be significant. I'll keep you updated as we learn more.
Gate.IO Rumors
I haven't delved extensively into this story, but I believe it's crucial to bring it to your attention. This isn't a post to either confirm or dismiss the circulating rumors; it's more of a cautionary note suggesting that you investigate the situation further, especially if your funds could potentially be impacted. It's worth noting that every crypto downfall began with a whisper, but not all whispers carry weight. Exercise caution and always do your own research (DYOR).
Coinbase Launching Institutional Futures… Today
Coinbase has announced the launch of institutional Bitcoin and Ether contracts on its CFTC-regulated derivatives exchange, Coinbase Derivatives Exchange, starting from June 5. This development comes in response to rising institutional interest and demand for advanced derivatives products. The new contracts, BTI futures and ETI futures, are sized at 1 Bitcoin and 10 Ether per contract respectively, providing institutions with greater precision in managing crypto exposure.
Coinbase states that these new contracts offer significantly lower fees than traditional offerings, increasing capital efficiency for institutions. They aim to foster a transparent and secure trading environment while equipping market participants with necessary tools to navigate the evolving digital asset landscape.
This announcement comes amidst Coinbase's aggressive expansion efforts, both domestically and internationally, despite regulatory scrutiny from the U.S. Securities and Exchange Commission. Recently, Coinbase has launched the Coinbase International Exchange based in Bermuda, signed a licensing deal with Austrian crypto business Bitpanda, and initiated various community outreach and educational campaigns.
Here is a great TWITTER THREAD on the topic.
Why This $1.3 Trillion Asset Manager Is Bullish On Bitcoin | Sandy Kaul, Franklin Templeton
In this episode, Sandy Kaul, the dynamic leader of Franklin Templeton's burgeoning crypto business, joins us for a comprehensive discussion on the intersections of institutional finance and cryptocurrency. Sandy has all the potential to emerge as a key advocate for institutional crypto, and our conversation covers an array of subjects. We delve into Franklin Templeton's strategic decision to adopt crypto and blockchain technology and discuss the launch of their pioneering tokenized security product. Regulatory issues, the positive impact of market bubbles on the industry, and Sandy's personal conviction in the transformative power of cryptocurrency are other significant themes addressed. Sandy offers valuable insights into her vision for the future of crypto. This episode is not one to miss!
In this episode with Sandy, we discussed:
Franklin Templeton’s way into crypto
Adoption & democratization of investments
Regulation
How Franklin Templeton managed to launch the tokenized product
Demand for crypto products
Institutional investors are getting ready to invest in crypto
Damage from FTX
Why bubbles are good for crypto
Institutions & crypto: what’s going on
10-year forecast
Crypto part of Franklin Templeton
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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