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In This Issue:
There Is Blood In The Streets
Bitcoin Dumps, Altcoins Surprisingly Hold Strong
Has The Stock Market Topped?
September Is Cursed
Grayscale Is Preparing For A Win
FTX And Genesis Strike A One-Sided Deal
Chinese Real Estate Company Evergrande Files For Bankruptcy Protection - In New York
SpaceX Wrote Down Their Bitcoin Holdings
Bitcoin's March To $150K With Mark Yusko
There Is Blood In The Streets
It was the early 19th century when Nathan Rothschild, positioned in London, received insider information ahead of the public about Napoleon's defeat at the Battle of Waterloo in 1815. With this presumed knowledge of the British victory, Nathan Rothschild seized the moment with an audacious investment decision that continues to resonate in his family's legacy.
Rothschild allegedly began acquiring British government bonds while others, still oblivious to the outcome and anxious about the war, held back. As news of the British triumph unfolded, trust in the nation's resilience escalated, resulting in a dramatic increase in bond prices. Rothschild's timing was nothing short of perfect, and the resulting profit was substantial.
"The time to buy is when there's blood in the streets, even if the blood is your own."
Let’s put aside the fact that Rothschild was acting on insider information and buying the blood with minimal risk…
This tale is but a single example of the Rothschilds’ success, yet what truly resonates with us today is the insight encapsulated in this quote. While I recognize that the saying is oft-repeated, I cannot emphasize enough my appreciation for it, especially considering our collective neglect in heeding it.
In the investment landscape, the overwhelming majority of investors prefer to possess winners in their portfolios. The predicament with winners is that once they attain that status, the cost to acquire them skyrockets, and their 'winning' streak is likely nearing its end. Warren Buffet encapsulates this idea eloquently: “You pay a very high price in the stock market for a cheery consensus.”
We have all bought the top at some point in our journey.
With regard to crypto, pinpointing the exact cause of the recent crash is invariably challenging, but the overarching principle remains intact - prices will eventually be much higher.
Did SpaceX actually sell their Bitcoin, or did they simply write it down? The armchair quarterbacks are having a field day trying to vet this news, even though we all know it is irrelevant in the grand scheme. The rumors of why this dump happened are swirling. Even if Musk did sell, it clearly was not yesterday!
Did Evergrande’s bankruptcy cause the sell off? Was it simply too much leverage being in the system?
CoinDesk took a stab at all of these narratives HERE.
We can conjecture all day, but will never really know.
What matters is that price is lower than it was yesterday.
We also know that “major” news is coming soon (likely to be good).
An ETF will gain approval at some point, the halvening will occur; patience is all that's required. Rumor has it that the ETH Futures ETF may be approved as soon as TODAY. We may also see a decision today in Grayscale Vs. the SEC, with many believing the outcome will be favorable.
From my perspective (NOT FINANCIAL ADVICE), this dip presents an outstanding opportunity for those investors who have been on standby, awaiting a chance to make some final preparations. True, Bitcoin may well fluctuate between $20k-30k for the rest of the year and possibly longer, but we all recognize that this current range will, in due course, become history, and quality alternative coins will flourish. I filled my “oh shit” bids above $25,000.
Moreover, isn't it more comforting to witness Bitcoin correcting on the absence of news rather than bad news? We ought to express gratitude that there's no major adverse news pushing price down.
I understand the pain of watching your portfolio diminish, but remember, the more profound the reset, the more remarkable the bounce (this only pertains to quality). Bitcoin requires momentum to break free from its current range and ultimately reclaim its all-time high. It won't magically leap to $100,000 without setbacks, so anticipate more along the way.
In all your investment decisions, reflect on your legacy and what you aim to accomplish. It may never feel pleasant to "buy blood in the streets," but that's the sole route to outpace the crowd.
Now let’s hope for some good news from the Grayscale case and some ETH Futures ETF approvals to get the ball rolling.
Bitcoin Dumps, Altcoins Surprisingly Hold Strong
The bad news? Bitcoin dumped. Massively. Yesterday we were watching $28,600 support, but ended up looking at the next level FAR lower down - $25,214.
I have switched from Bitstamp to Coinbase for my charts, finally. Bitstamp did not see the same price action as every other exchange yesterday. So my levels will now be slightly different, but the same areas.
Look where this dump ended (for now). EXACTLY at $25,214, the level that signaled an end to the last bear trend down from $69,000.
Will it hold? I have no idea, but that’s a hell of a support tap.
I will be watching the weekly close to see if this holds, and if price can get back above the red 200 MA.
For now, $25,214 is the bottom of the range, and the former support at $28,600-$28,800 is resistance. We have stepped down.
The daily 200 MA is broken, which is not ideal. All MAs are now resistance.
I have been warning of a likely top for quite a while, ever since we printed bearish divergence with overbought RSI. I did NOT think we were going this low and certainly not this fast. But as I have discussed, I had bids there just in case which are now filled.
RSI is now wildly oversold, sitting around 20. It can stay there a while and price can push down further, but I will be watching for relief and certainly for bullish divergence. There’s so much fear… my gut says the bottom is near. Just a guess.
4-HOUR CHART
Instead of a chart, let’s look at a video!
4-HOUR RSI IS THE MOST OVERSOLD IT HAS EVER BEEN. EVER! At 5.27, RSI has never been more oversold. It touched almost the same low in November of 2018. This was a serious dump and we should get some relief. Before the 4-hour candle closed, RSI tapped 2. Absolutely unheard of.
Watch for bullish divergence with RSI on the 4-hour as the first clear bottoming signal.
Here is the BIG SURPRISE of the day. Altcoins OUTPERFORMED Bitcoin on the dump. I was totally wrong here, writing even yesterday that altcoins would likely get absolutely slaughtered if Bitcoin dropped. Dominance has fallen off of a cliff the past two days, and Ethereum outperformed. Almost every coin is green on the ALT/BTC pair. I have no explanation for this, but I am keeping a close eye on it.
Has The Stock Market Topped?
I wrote an entire section of the newsletter a few weeks ago about why I was selling quite a bit of stock and believed the market was topping. The combination of irrational exuberance and overbought conditions at key resistance on charts with topping patterns was enough to give me pause. For the moment, I was seemingly right. I think a larger correction is coming, but we will see.
Here’s the market wrap…
Stocks are facing significant losses globally, with MSCI's global benchmark potentially seeing its largest weekly drop since March, fueled by concerns over China and higher global interest rates. Europe's Stoxx 600 fell 0.9%, and US equity futures also indicated a decline, while Bitcoin slid 4% and oil is set for its first weekly loss since June. Bond markets, however, showed a rebound, with the yield on 10-year Treasuries falling five basis points. Worries persist about entrenched inflation, rising rates, China's property crisis, and troubles in the shadow banking system. The Cboe Volatility Index's climb to its highest level since May and warnings from financial experts like Bank of America's Michael Hartnett indicate increased market nervousness.
Key events this week
Eurozone CPI, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 fell 0.6% as of 11:09 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 fell 0.7%
The MSCI Emerging Markets Index fell 0.9%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0873
The Japanese yen rose 0.2% to 145.48 per dollar
The offshore yuan fell 0.1% to 7.3123 per dollar
The British pound fell 0.1% to $1.2733
Cryptocurrencies
Bitcoin fell 4.4% to $26,420.77
Ether fell 2% to $1,682.71
Bonds
The yield on 10-year Treasuries declined six basis points to 4.22%
Germany’s 10-year yield declined 11 basis points to 2.60%
Britain’s 10-year yield declined seven basis points to 4.67%
Commodities
Brent crude was little changed
Spot gold rose 0.2% to $1,894.12 an ounce
September Is Cursed
September has a reputation as Bitcoin's most challenging month, and though the exact reasons remain uncertain, several factors might contribute. The slump could be due to investors coming back from summer breaks, eager to lock in gains before year-end, or even considering potential tax consequences. It's a common expectation that quality assets will rise towards the year's end, so it's logical that major investors, or "whales," might want to drive down prices in preparation for an end-of-year increase.
Grayscale Is Preparing For A Win
Grayscale is hiring for a Senior ETF Associate, prompting the question: Is Grayscale merely being proactive, or does the asset manager have inside knowledge? Hiring for this position costs Grayscale almost nothing, so it's likely a proactive move. Nonetheless, the job posting is a positive sign and could be even more beneficial for marketing. What's worth addressing about the post is that there is no mention of "Bitcoin" or "spot," but it does state that "cryptocurrency and blockchain technology is a plus." My interpretation is that Grayscale has confidence in a favorable outcome; otherwise, they wouldn't have taken this step.
FTX And Genesis Strike A One-Sided Deal
The 2022 crypto bankruptcy saga appears set to continue for years, but a notable agreement has been reached between FTX and Genesis. The bankruptcy process is, without a doubt, perplexing. In essence, both entities owe each other, but Genesis's debt to FTX far outweighs what FTX owes Genesis. Last I checked, FTX had a claim against Genesis for $3.9 billion, a sum that seems insignificant compared to what Genesis is currently paying FTX to settle the debt – a situation that leaves creditors at a disadvantage. How this deal came to be is beyond me, but it's clear that Genesis came away with the better end of the bargain, to the detriment of those on the losing side with FTX.
Chinese Real Estate Company Evergrande Files For Bankruptcy Protection - In New York
China's Evergrande Group, once the country's second-largest property developer, filed for Chapter 15 bankruptcy in New York, marking a significant step in the ongoing financial crisis that began with its default in 2021. The default had far-reaching effects on China's property markets, triggering shockwaves through the real estate sector, which accounts for up to 30% of China's GDP. The default also prompted concerns among other major developers in China, amplifying the industry's problems amid an economic slowdown.
Evergrande's bankruptcy is part of a bigger picture, as the company's enormous debt load reached roughly 2% of China's entire GDP by the end of last year. The developer recently announced a debt restructuring plan, China's largest on record, aiming to resume normal operations over the next three years. However, it will require significant additional financing, with some funds having been secured through a $500 million investment in its EV group by Dubai-based company NWTN. The ongoing saga underlines the fragility and interconnectivity of China's property markets and the broader economy.
SpaceX Wrote Down Their Bitcoin Holdings
SpaceX reportedly wrote down the value of its Bitcoin holdings by $373 million in 2021 and 2022 and may have sold the cryptocurrency, although it hasn't been confirmed if the entire amount was sold. Or any. The Wall Street Journal's report indicates that the write-down was part of SpaceX's financials, showing expenses related to acquiring property, equipment, and research and development. SpaceX CEO Elon Musk, known for his influence on the crypto market, announced the company's acquisition of Bitcoin in 2021, following a similar move by Tesla, another Musk co-founded company. Tesla later liquidated roughly 75% of its original $1.5 billion BTC holdings. The timing of SpaceX's reported Bitcoin sale is unclear, reflecting the fluid and often uncertain nature of cryptocurrency investments among major tech firms.
Bitcoin's March To $150K With Mark Yusko
In anticipation of the upcoming Bitcoin halving and potential ETF approval, leading crypto experts are sharing their predictions. Mark Yusko, a personal favorite of mine, will offer his insights. Meanwhile, Dan "The Chart Guy" will give an overview of the market and discuss some of his trading strategies with us!
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.