In This Issue:
Dumb Money
Bitcoin Thoughts And Analysis
Altcoin Thoughts
Legacy Markets
Michael Saylor Bought More Bitcoin
Bitwise Goes Toe to Toe With the SEC
JPMorgan Is “Disappointed” With Ethereum
China Is Progressing
Stock Market Crash Coming? Paradigm Shift For Gold? What About Bitcoin? | Macro Monday
Dumb Money
The much anticipated film 'Dumb Money' made its debut in theaters eleven days ago. The movie showcases the intense battle between Wall Street and the Reddit army over Gamestop stock, with a star-studded cast including Seth Rogen, Pete Davidson, Paul Dano, and Shailene Woodley.
Most of us are already acquainted with the plot of the GME short squeeze that unfolded in early 2021. But are you familiar with the central character driving this revolution? In today’s letter, I will briefly recount the story of Keith Gill and reveal an important lesson.
It's quite a captivating tale.
Keith Gill, widely recognized as 'DeepF***king Value' and 'Roaring Kitty' on the internet, was a low-level investment services agent by day and an unwavering value investor by night. Gill cultivated his reputation through countless hours of live streaming to a cult-like audience that shared his belief in Gamestop's undervaluation.
We're all familiar with how the narrative unfolds: Gamestop's stock finally gains momentum, hedge funds increase their short positions, the Reddit group gains popularity, the stock grabs national attention, Wall Street bails out Melvin Capital, GME skyrockets, Wall Street faces a dilemma, Robinhood restricts the 'buy' option, GME sees a decline, Melvin Capital closes its doors, Wall Street and retail are collectively rekt.
What we don’t know is whether Keith Gill ever decided to cash out. Starting with an initial investment of $53,000, Gill's call options soared to a staggering $48 million at their zenith, with daily fluctuations at one point exceeding $15 million in losses. It's essential to remember that his entire family net worth was approximately $100,000 before the Gamestop saga, making this story all the more extraordinary.
From the perspective of an outsider, Gill was nothing short of a crazed investor who made a blood pact with the meme stock gods to never sell, under any circumstances. However, to one of his devoted followers, Gill was a brilliant value investor who personified the very essence of conviction and revolution. So, which view holds true?
Given that we lack information about whether Gill ever decided to lock in his gains and that the trade represented more than just its dollar value, it's challenging to offer a definitive answer. Nevertheless, this situation does bring to light the importance of discussing profit-taking.
Every investor should have a predetermined threshold where it becomes unmistakably clear that it's time to start cashing in. This threshold could be based on multiples, specific price levels, signs of hedge fund troubles, or predetermined percentages. The point needs to be obvious so it can't be missed.
Before the Reddit and crypto communities ignite their torches, let's clarify a few key points. First and foremost, exiting a position doesn't equate to switching sides. There will come a day when I sell some of my Bitcoin, yet I'll continue to be a fervent supporter of Bitcoin's success, as many of us share a common purpose that transcends personal holdings. No one should be scrutinized for their decision to sell.
The second consideration when it comes to selling is this: selling doesn't necessarily mean liquidating an entire position; you can choose to take partial profits at different price levels while retaining a portion of your investment indefinitely. The third and final point is that it's always prudent to reconsider your position if the narrative, fundamentals, or regulatory landscape undergoes significant changes that contradict your original investment thesis.
If you are on a boat and discover holes in it, you are going to abandon ship. Investing is the same.
Amid the frenzy, Keith Gill endured mockery, ridicule, and harassment for his decision not to sell, and he would have encountered similar consequences had he chosen to sell publicly. Eventually, there will be a moment when each of us, the 'dumb money,' must confront a pivotal choice that will shape our financial futures.
If you brace yourself for criticism, the possibility of being told you've 'made the wrong decision,' and stick to your plan to sell at a clear predefined juncture, you will emerge victorious. I plan to be there and hope you come too. Our time is just around the corner. Dumb money in crypto was never dumb.
Bitcoin Thoughts And Analysis
I know that I sound like a broken record but… there is no volatility, therefore minimal opportunity. This is the 4-hour chart and shows Bitcoin trading in a range of less than $3000 for well over a month. Even the “big” Grayscale move and other news driven events were immediately erased. It seems for now that this is the “fair price” for Bitcoin at this point in the cycle…. which is a lot better than it sitting at $6,000 in the last cycle!
Altcoin Thoughts
There is a lack of updates here because there is a lack of movement and I have low confidence in any altcoin trades and setups at the moment. Brighter days are ahead, but for now it is better, in my opinion, to sit on our hands and wait.
Legacy Markets
The bond selloff has temporarily paused and the dollar has steadied, but European shares continued their downward trajectory, marking a fourth consecutive day of retreats. The Stoxx 600 benchmark fell by 0.6%, and U.S. equity futures are also down, causing the MSCI All Country World Index to approach its longest losing streak in a decade. Yields on Treasuries and European government debt have stabilized after reaching highs not seen in years, indicating investors are bracing for a prolonged period of high interest rates. Oil prices have retreated due to the strengthening dollar reducing demand. Tech stocks, particularly those in the Nasdaq 100, are feeling the pressure as they become less attractive in a high-interest-rate environment, leading to a net short position of $8.1 billion.
Global markets are caught in a challenging situation where both the U.S. and Europe are facing the potential for increased interest rates and economic slowdown. A warning from Moody's about a possible downgrade in America's credit rating due to a government shutdown adds another layer of uncertainty. Meanwhile, economic worries extend to Asia, where Chinese markets continue to decline, primarily due to ongoing concerns in the property sector. High-profile firms like China Evergrande Group are missing debt payments, which only adds to fears about a potential ripple effect slowing down global economic growth. This uncertainty is setting the stage for cautious market activity as investors await more definitive signs about the economy's direction.
Key events this week:
US new home sales, Conference Board consumer confidence, Tuesday
ECB’s Philip Lane speaks on monetary policy, Tuesday
China industrial profits, Wednesday
US durable goods, Wednesday
Eurozone economic confidence, consumer confidence, Thursday
US initial jobless claims, GDP, Thursday
Fed Chair Jerome Powell town hall meeting with educators while Richmond Fed President Tom Barkin, Chicago Fed President Austan Goolsbee make speeches, Thursday
Eurozone CPI, Friday
Japan unemployment, industrial production, retail sales, Tokyo CPI, Friday
US consumer spending, wholesale inventories, University of Michigan consumer sentiment, Friday
ECB President Christine Lagarde speaks, Friday
New York Fed President John Williams speaks, 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 fell 0.5%
Nasdaq 100 futures fell 0.5%
Futures on the Dow Jones Industrial Average fell 0.4%
The MSCI Asia Pacific Index fell 0.9%
The MSCI Emerging Markets Index fell 0.9%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0601
The Japanese yen was little changed at 148.90 per dollar
The offshore yuan was little changed at 7.3141 per dollar
The British pound fell 0.2% to $1.2188
Cryptocurrencies
Bitcoin fell 0.1% to $26,255.78
Ether rose 0.3% to $1,591.65
Bonds
The yield on 10-year Treasuries declined two basis points to 4.51%
Germany’s 10-year yield declined one basis point to 2.79%
Britain’s 10-year yield was little changed at 4.32%
Commodities
Brent crude fell 0.8% to $92.52 a barrel
Spot gold fell 0.2% to $1,912.13 an ounce
Michael Saylor Bought More Bitcoin
Like clockwork, MicroStrategy's corporate treasury has once again increased its Bitcoin holdings, this time by a substantial $147.3 million! According to reports, this acquisition took place at an average price of $27,053 per Bitcoin, a couple of thousand dollars below the overall average price of their entire stack, which stands at $29,582 per Bitcoin. With this latest purchase, MicroStrategy's impressive Bitcoin portfolio now comprises a staggering 158,245 BTC, acquired at a total cost of $4.68 billion. Could this signify a local peak? Perhaps, but as I often say, Michael Saylor will enjoy the last laugh. This is truly remarkable.
Bitwise Goes Toe to Toe With The SEC
Instead of waiting for the SEC's response on ETFs in mid-October, Bitwise has taken a proactive approach by addressing the SEC's previous objections point by point. The rationale behind this strategy is to preemptively address any potential reasons the SEC might raise to deny ETF applications in the upcoming decision period. Filers are aware that if the SEC were to introduce new grounds for denial, it could lead to additional legal proceedings and a delay in the approval process. The SEC will do whatever it can to prolong the acceptance of an ETF, meaning it’s on us to take every measure possible to fight back.
JPMorgan Is Disappointed With Ethereum
I debated whether to share this segment for several reasons, but in the spirit of impartial reporting, here it is. JPMorgan's disappointment seems dubious anyway, but are they also disillusioned with DeFi and Bitcoin at the same time? Asset prices are currently in an accumulation phase, and concerns about regulatory and legislative uncertainties have reached unprecedented levels this year. In hindsight, our excitement over the Merge was understandable, but it was never a guarantee that every metric would immediately turn positive for the rest of the year. It's worth noting that Ethereum has become more energy-efficient, and the state of layer 2 scaling has never been as robust as it is today. The reality here may be that JPMorgan is navigating bear market sentiment in the cryptocurrency space for the first time.
China Is Progressing
While cryptocurrencies remain officially prohibited in China, the country has been gradually relaxing its restrictions and attitudes toward this asset class. Just recently, a Shanghai People's Court released an article acknowledging the positive attributes of Bitcoin, highlighting its scarcity, global acceptance, and intrinsic monetary qualities. In this publication, China differentiates Bitcoin from other speculative investments that it views unfavorably. Although this doesn't signify an end to the bans, it marks the beginning of acceptance in one of the world's most tightly regulated countries."
Stock Market Crash Coming? Paradigm Shift For Gold? What About Bitcoin? | Macro Monday
Join Dave Weisberger, Mike McGlone, and James Lavish as we break down what's going on in macro and crypto!
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.