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In This Issue:
The Top
Bitcoin Sneezes, Alts Dump - Be Careful
Inflation Is “Still Too High” - Legacy Markets
The SEC Did Not Postpone All ETFs Until 2024
Michael Burry’s Short Position
Binance Continues To Consolidate
Bitcoin Will Pump If This One Thing Happens | Benjamin Cowen & James Butterfill
The Top
On September 15th, 2022, I published newsletter #580, titled “The Bottom.” This is how it began:
In this letter, I analyzed how Group A's high-risk, high-reward approach contrasted sharply with Group B's more cautious strategy, like dollar-cost averaging or HODLing. These differing philosophies greatly influenced their profits in 2023.
Looking back, members from either group could have prospered as markets began to surge at the year's turn. But it's likely that Group A fell short of Group B's performance unless they changed their stance within a brief period. Regardless, my lasting advice in that letter was: “if you are unsure, play the long game - that’s the only strategy that is guaranteed to win.”
That letter proved prescient, as the market bottomed shortly after publication. But my focus today isn't to dwell on global markets. Instead, I want to address a new challenge that crypto investors face in the current bull market, where lessons from nearly a year ago may guide us.
This time, the discussion isn't about 'the bottom'; it's about 'the top.'
In the crypto world, conditions vary, and rules aren't uniform, but the essence of this letter is the emerging diverse opinions about 'the top,' creating a divided community once again. Here's the distinction:
Group A: Believes the 'top' will occur at a particular time, aiming to maximize gains. Group B: Doesn't see the 'top' happening at a fixed time, seeking to capitalize on the run.
While both groups agree on the bull market's existence, Group A looks into the future, and Group B limits its view to today. It's similar yet distinct from the earlier dilemma.
Group A's thought process is evident in predictions like:
Crypto will pump in late 2023 as ETFs are approved, and the bull market will end mid-2024.
Crypto will range between $20,000 - $30,000 for 2023, then surge into halving early 2024, peaking late 2024.
Crypto will correct if ETFs are delayed until March, then after approval, prices will increase, with the real top not arriving until early/mid-2025.
These predictions aren't inherently wrong, but they can mislead inexperienced investors when repeated enough, tempting them to trade away their positions.
Some Group A investors are risk-averse (e.g., “I won’t touch Bitcoin until there is a spot ETF”), which is valid but not typical. Pinpointing the exact timeline for maximum profits is nearly impossible for most of them.
Revisiting newsletter #580, readers who held on for just a short while enjoyed an impressive equities bull run, simply by not seeking the bottom. This time, I'm NOT asserting that Bitcoin is on the verge of a surge. Rather, I emphasize the benefits of patience, enjoying gains as they come, rather than seeking the perfect opportunity.
Nobody predicted BlackRock's ETF proposal, an early-stage bull run event. In essence, no one truly knows when the real bull run starts.
My personal approach will continue to involve high-conviction small trades for enjoyment, but as an investor, I'll stay firmly in Group B. I recognize that markets trend upwards, and it's crypto's moment to shine. I eagerly await our collective arrival at the 'top,' striving to get there 100% intact.
Bitcoin Sneezes, Alts Dump - Be Careful
Bitcoin is still completely sideways, but yesterday’s price action is notable - not because of what Bitcoin did, but because of what altcoins did. Bitcoin dropped roughly $400, but altcoins largely dropped 4-7% across the board - a large and disproportionate move.
You can see the 24 hour return on these coins on the far right. This is coins 7-15 by market cap.
I had Ben Cowen on YouTube yesterday, and we discussed the future scenarios for Bitcoin and altcoins, and this small move was a preview of our thesis - that right now the situation for altcoins is suboptimal and more likely to get worse than better.
Bitcoin is sideways, usually the best situation for altcoins - but that has not been the case this time. So if Bitcoin drops from here, altcoins will almost definitely drop more - the worst case scenario. If Bitcoin goes up from here, money will likely flow out of alts and into Bitcoin, meaning Bitcoin is still the better bet. And with Bitcoin sideways, altcoins still have failed to outperform.
Nothing is certain, but be careful out there. I still believe there will be another eventual shakeout before the halving next year.
Inflation Is “Still Too High” - Legacy Markets
European stocks wavered after Tuesday's slump, awaiting signals from the US Federal Reserve regarding interest rates. The pound strengthened due to UK inflation surpassing expectations, while Europe's Stoxx 600 benchmark rose slightly. US futures indicated gains, and government bonds in the US and Europe strengthened, pausing recent losses caused by interest rate concerns.
China's economic issues continued to affect markets, with the yuan nearing its weakest in 16 years against the dollar. Analysts noted a lack of catalysts, giving economic forecasts more influence. Bank of England's peak interest rate expectations remained at 6% after UK inflation data, adding to market jitters caused by strong wage figures and US retail statistics.
US 10-year Treasuries led gains among bonds, with experts seeing them as an attractive entry point for investors. Beijing's economic troubles remained in focus as the People’s Bank of China took measures to support the yuan and financial system. Concerns also grew around Chinese real estate markets and the yuan's outlook. In commodities, oil and gold prices edged higher, and European natural gas futures increased substantially, reflecting potential disruptions against weak demand and high storage in the region.
Key events this week:
Eurozone industrial production, GDP, Wednesday
UK CPI, Wednesday
US FOMC minutes, housing starts, industrial production, Wednesday
US initial jobless claims, US Conf. Board leading index, Thursday
Eurozone CPI, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 rose 0.2% as of 9:55 a.m. London time
S&P 500 futures rose 0.2%
Nasdaq 100 futures rose 0.3%
Futures on the Dow Jones Industrial Average rose 0.2%
The MSCI Asia Pacific Index fell 1.2%
The MSCI Emerging Markets Index fell 0.6%
Currencies
The Bloomberg Dollar Spot Index fell 0.2%
The euro rose 0.2% to $1.0928
The Japanese yen was little changed at 145.54 per dollar
The offshore yuan rose 0.1% to 7.3137 per dollar
The British pound rose 0.4% to $1.2761
Cryptocurrencies
Bitcoin was little changed at $29,155.21
Ether fell 0.2% to $1,823.27
Bonds
The yield on 10-year Treasuries declined three basis points to 4.18%
Germany’s 10-year yield declined one basis point to 2.66%
Britain’s 10-year yield advanced two basis points to 4.61%
Commodities
Brent crude fell 0.1% to $84.78 a barrel
Spot gold rose 0.2% to $1,905.26 an ounce
Breaking News! Coinbase To Offer Futures Trading
Coinbase Financial Markets, Inc. has received regulatory approval from the National Futures Association (NFA) to operate as a Futures Commission Merchant (FCM) and offer eligible US customers access to crypto futures. This marks a significant milestone in Coinbase's commitment to regulated and compliant operations, making it the first crypto-native leader to offer spot crypto trading along with regulated crypto futures. The approval highlights Coinbase's continuous collaboration with regulators, working since September 2021 to comply with the CFTC’s customer protection requirements. The new license will allow more people to safely access the cryptoeconomy in the US, keeping the country at the forefront of digital innovation. The global crypto derivatives market, which accounts for about 75% of crypto trading volume, is seen as vital for providing leverage and risk management for investors, aligning with Coinbase's acquisition of FairX and the successful launch of Bitcoin and Ethereum futures contracts. Additional details about the futures offering for verified US customers will be provided in the coming months.
The SEC Did Not Postpone All ETFs Until 2024
There was no concrete evidence supporting these claims, but Crypto Twitter embraced the news as though it was fact. Should the SEC make such a decision, it would be publicly available for anyone to confirm. Moreover, it's unlikely that Crypto Twitter has insider information within the SEC to make this kind of judgment. Gary Gensler, who is still facing significant scrutiny, should remain our primary focus.
Michael Burry’s Short Position…
I've encountered numerous misunderstandings regarding Michael Burry's recent short position, so I felt compelled to clarify things. Many headlines, highlighted by The Kobeissi Letter, have proclaimed that Michael Burry assumed a massive $1.6 billion short position, predicting a stock market crash. While there's some truth to this statement, it's not entirely accurate without understanding the intricacies of the options market.
Michael Burry did not actually invest $1.6 billion in his SPY and QQQ puts; he spent significantly less. The exact purchase price has not been disclosed, but when The Kobeissi Letter estimated the possible cost of the contracts, the figure was around $424,000, far from millions. Headlines can be misleading, and this instance is a reminder to approach them with caution.
Binance Continues To Consolidate
Alongside reducing its presence in countries less focused on cryptocurrency, Binance is also discontinuing its trading service, Binance Connect, formerly known as Bifinity. Honestly, I wasn't even aware that Binance offered this product, so its termination doesn't seem to be a major issue. However, what does catch my attention is the speed of the shutdown. The news broke yesterday, and the decision was implemented today – a remarkably quick timeline, especially considering that such changes usually take more time to phase out.
Bitcoin Will Pump If This One Thing Happens | Benjamin Cowen & James Butterfill
Benjamin Cowen and James Butterfill joined my show yesterday!
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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.