The Wolf Den #776 - Extremes Views Are Expensive
Don't get caught up in hyperbole.
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In This Issue:
Extremes Views Are Expensive
Bitcoin Showing Signs Of Weakness
Injective Ready For Another Leg Up?
Rate Hikes To End In Europe? Legacy Market Wrap
Check Out Meld!
The Real Test For Ripple Hasn’t Arrived Yet
Celsius Coins Are On The Move
Gensler Is “Disappointed” With Defeat
Is The Dollar Dead? Macro Outlook For USD With Frances Coppola & Anna Wong | Macro Monday
Extremes Views Are Expensive
When the world around you is indulging in revelry and fomo, it's often challenging to assert yourself and voice the unvarnished truth. It's a tough task that I undertook in yesterday's newsletter. I felt compelled to delve deeper into a subject that's been playing on my ADHD brain - the dogmatic maximalism within the crypto sector. While it's one of the most exasperating ideological facets of crypto, it's worth acknowledging that radical views pervade all markets. So today, we'll dissect this very topic.
Ever had a conversation with a friend, relative, dentist, or barber and come across an extreme view about markets that left your head spinning? Rationalizing with or discerning the reasoning behind such extreme views can be a fruitless endeavor. They merely exist, and our role is to ensure they don't throw us off our balance. Unveiling the truth behind these radical opinions often requires a bit of sifting, but there's often a kernel of wisdom hidden in there. Let's unravel this further.
I will highlight a few extreme viewpoints I've heard over the years and scrutinize them. We'll kick off with crypto and gradually widen the spectrum.
"Pull your money out of banks; they are teetering on the brink of collapse."
This idea gained traction last March, though its longevity leaves much to be desired (yes, that's sarcasm). While I concede that the evolving financial landscape may nudge banks towards transformation, the demise of banking is not imminent. Your money is generally secure in top-tier banks. Nevertheless, for those with substantial wealth, diversification is prudent. However, moving your hard-earned money entirely away from traditional banking introduces its own set of risks.
"Crypto offers the highest returns. Not investing all your money in crypto is a missed opportunity."
Firstly, let's replace 'crypto' with 'Bitcoin.' Bitcoin has proven to be a dependable long-term investment. Yet, it's not the holy grail for everyone. For instance, my friends thriving in the real estate business wouldn't necessarily benefit from allocating more than 1% or 2% of their resources to Bitcoin. Sure, moving some wealth out of the fiat system makes sense, but crypto isn't the magic bullet for all, and many investors incur losses due to the inability to weather the downturns or keep pace with the trends.
Let's shift the spotlight to radical views prevalent outside of crypto.
"I must wait for the opportune moment to invest; starting now makes no sense."
Data consistently demonstrates that 'time in the market' outperforms 'timing the market.' Yet, many budding investors seem to believe otherwise. A significant majority of investors sitting on the sidelines waiting for the 'perfect' window to invest fail to capitalize when it arrives. Therefore, adopting a systematic investment strategy over time often proves more fruitful. I know several individuals who missed the stock market boom, wrongly anticipating banking crises, inflation, and international conflicts to disrupt the market.
"The Fed is puppeteering everything. It's futile to expect wins in the current market structure."
The Fed and its decision-making body, the FOMC, may seem like smoke and mirrors. While the impact of Fed's policy shifts on markets cannot be denied, the performance of tech stocks during the first half of this year in a historically stringent macro environment created by the Fed is a testament to market resilience. The market follows its own rhythm, regardless of the Fed's actions. Don't let the Fed's maneuvers deter you from investing; it's just one piece of the puzzle.
"Trust your gut. Your investments should reflect your intuitions and everyday decisions."
An enjoyable ride in your new Ford Bronco or an efficient GE washer-dryer isn't a sufficient reason to impulsively purchase the stock. Often, an investor's positive experience with a product or service convinces them the stock will soar. This approach, unfortunately, neglects economic data, market analysis, and research in favor of anecdotal experiences. If investment were this straightforward, we'd all be wealthy. However, that's far from the truth.
"Market crashes have always been predictable and always will be..."
This sentiment typically comes from those who've never successfully anticipated a market crash or profited from one. Astute investors know that predicting the future is a mug's game. Instead, they take calculated risks and seize the opportunities that present themselves. For every renowned investor who has accurately predicted a market top or bottom, there are countless others who've been misguided, along with numerous 'expert' opinions that have proven unfounded. Markets typically crash when the least number of people expect them to, inflicting maximum damage. Abandon attempts to call tops or bottoms and instead, hone your knowledge of a specific sector.
The takeaway here is that extreme views can prove costly.
Markets, while efficient, are subject to deviation from the mean as human judgment drives them. As disciplined investors, our aim should be to maintain neutrality and balance, however challenging that may seem. This habit pays off in the long run, yielding enhanced returns and mitigating short-term risks. Thus, I challenge you, dear readers, to unearth and address your inherent biases that may be undermining your returns.
It's a strenuous task, but the rewards can be immense if you manage to unearth insights about yourself. For instance, I've recognized my inclination towards crypto, which sometimes hampers my ability to cash in profits when the market signals are evident. Acknowledging this bias empowers me to counter it logically, eventually enabling me to amass greater wealth from the profits I secured. This principle can be similarly beneficial for you.
Good luck to all. Remember, the quest for self-improvement is unending and challenging, so embrace each day as an opportunity to progress slightly. Crypto, like all other markets, has rewarded and will continue to reward rational investors over time. I hope you'll join me on this journey.
Bitcoin Showing Signs Of Weakness
Bitcoin dipped yesterday, but quickly recovered. Now it is continuing to show further weakness.
On the positive side, RSI is at 50, which is considered support and if it can close in the current area, then hidden bullish divergence is possible - a higher low on price and lower low on RSI. That would require a perfect close, so I am not considering it for the moment.
My bias is still for further downside to gain fuel for another eventual move up.
Injective Ready For Another Leg Up?
Injective has been range bound since April, between roughly $9.97 and $5.60. You can see that price is currently consolidating in a bull flag or descending wedge right under the top resistance of the range. There was a nice volume spike pushing price to the range highs, and now we see decreasing volume as price floats down - that is the definition of bullish consolidation.
There is nothing to do here yet, but price consolidation under resistance often leads to a breakout.
There are a few ways to play this - some will set an alarm on the descending blue line and buy the breakout. That’s risky. Others will buy a retest of the blue line after a breakout - slightly less risky. The “safest” way to approach it is to wait for a break above the range and close above, and even a retest of the range highs.
Set your alarms on this one and keep it on your list.
Rate Hikes To End In Europe? Legacy Market Wrap
Key events this week:
US retail sales, industrial production, business inventories, cross-border investment, Tuesday
Eurozone, UK CPI, Wednesday
US housing starts, Wednesday
China loan prime rates, Thursday
US initial jobless claims, existing home sales, Conf. Board leading index, Thursday
Japan CPI, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 rose 0.3% as of 11:03 a.m. London time
S&P 500 futures were little changed
Nasdaq 100 futures were little changed
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index was little changed
The MSCI Emerging Markets Index fell 0.5%
Currencies
The Bloomberg Dollar Spot Index fell 0.1%
The euro rose 0.1% to $1.1249
The Japanese yen rose 0.4% to 138.19 per dollar
The offshore yuan was little changed at 7.1762 per dollar
The British pound rose 0.3% to $1.3106
Cryptocurrencies
Bitcoin rose 0.1% to $29,973.13
Ether rose 0.4% to $1,898.83
Bonds
The yield on 10-year Treasuries declined five basis points to 3.75%
Germany’s 10-year yield declined eight basis points to 2.40%
Britain’s 10-year yield declined seven basis points to 4.36%
Commodities
Brent crude rose 0.7% to $79.04 a barrel
Spot gold rose 0.4% to $1,962.29 an ounce
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The Real Test For Ripple Hasn’t Arrived Yet
Triumphing over the SEC was an essential initial move for Ripple to actualize its vision, yet the genuine litmus test hinges on whether banks will truly begin utilizing XRP for its designated purpose. For a considerable period, XRP proponents have asserted that Ripple is destined to replace SWIFT, thereby facilitating trillions in cross-border payments. Now, the moment of truth has arrived. While expecting Ripple to accomplish such a monumental task in the immediate future might seem far-fetched, it is reasonable to anticipate some degree of progress or partnerships in the ensuing year. This marks Ripple's true examination.
In a recent interview, Ripple CLO Stuart Alderoty said the following when asked if the ruling would lead to increased interest from banks: “I think the answer to that is yes.” Aleroty continued, “I think we're hopeful that this decision would give financial institution customers or potential customers comfort to at least come in and start having the conversation about what problems they are experiencing in their business, real-world problems in terms of moving value across borders without incurring obscene fees.”
My current thesis is simple: if XRP fails to stay relevant with positive developments, I don't see XRP performing well in the current bull cycle.
Celsius Coins Are On The Move
The market is on tenterhooks as Celsius prepares to liquidate its hefty $215 million holdings, creating a buzz every time the insolvent lender transfers altcoins. Yesterday morning, Celsius relocated roughly a quarter of its cache to the institutional crypto exchange FalconX, including $13.6 million in MATIC, $10.7 million in LINK, and $7.3 million in AAVE. If you're not aware, Celsius plans to divest all of its holdings into Bitcoin and Ethereum. The company currently holds approximately $70 million in CEL, $52 million in MATIC, $26 million in ADA, $17 million in LINK, and $14 million in LTC, along with smaller amounts of other coins.
Gensler Is “Disappointed” With Defeat
Shockingly, Gary Gensler is “disappointed” that his strong opinions on crypto were not supported by the law. Sorry, not sorry, Gary. It’s important to remember that a regulator’s view on crypto is not law until the courts declare it as such, Ripple being the prime example. It will be interesting to see how Gensler rationalizes the court’s decision over the coming weeks/months and if he will come back swinging or begin to loosen up.
“Our mission remains investor protection, promoting capital formation, and the markets in the middle. We are pleased with that decision in recognizing the need to protect institutional investors but disappointed in what the court said about retail investors. We are still looking at it and assessing that opinion.”
Is The Dollar Dead? Macro Outlook For USD With Frances Coppola & Anna Wong | Macro Monday
Join Macro Monday with two special guests: Frances Coppola, from Coppola Comment, and Anna Wong, Bloomberg's LP Chief US Economist, who join my two other regular co-hosts: Mike McGlone, Senior Macro Strategist at Bloomberg Intelligence, and Dave Weisberger, Co-Founder and CEO at CoinRoutes.
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.