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In This Issue:
Never Blow A Lead
Don’t Miss This Black Friday Deal
Bitcoin Thoughts And Analysis
Legacy Markets
Binance Wins
The ETF Inches Closer
Financial Services Giant, Banco Santander, Is Offering Crypto
The SEC Sues Kraken
Election Shock! Will Argentina Adopt Bitcoin? l Macro Monday
Never Blow A Lead
The simple elegance of a bull market lies in the straightforward concept that each successive move carries increasing weight on your portfolio.
When Bitcoin was priced at $20,000, a 10% upward shift resulted in a portfolio increase of $2,000 for one Bitcoin.
As Bitcoin reached $30,000, a 10% move translated to a $3,000 portfolio increase for one Bitcoin.
While a $1,000 jump may not be exhilarating, consider these scenarios:
When Bitcoin reaches $100,000, a 10% move will yield a portfolio of one Bitcoin +$10,000.
$500,000, yields +$50,000, and $1m yields +$100,000. Obvious stuff, right?
4th-grade math is the beauty of a bull market. Granted, achieving a 10% move becomes more challenging as Bitcoin climbs, yet the increasing impact of any move becomes substantial. Even a 5% move at $100,000 is more than twice as impactful as a 10% move at $20,000 in dollar terms. A +1% move at $200,000 yields the same as a 10% move at $20,000.
Conversely, in a bull market, occasional downward moves become more painful. A 10% dip at $100,000 results in a $10,000 downswing, and a 10% move at $500,000 leads to a $50,000 downturn - quite significant. Now, let’s examine how the numbers play out in a bear market.
In a bear market, as prices decline, each downswing inflicts diminishing damage to the bottom line, and occasional upward bounces offer minimal relief. In summary so far:
Subsequent upward and downward moves in a bull market become increasingly weighty.
Subsequent upward and downward moves in a bear market become progressively lighter.
So what can we make of this?
To begin, let's revisit the challenging emotions investors experienced during the preceding bear market. With each subsequent bankruptcy and wave of unfavorable news, the market faced further declines. Although each event inflicted slightly less damage to our bottom line, the overall weight of these occurrences still felt substantially painful.
Looking on the positive side, the current reality has completely shifted, but employing the bull market logic outlined earlier suggests that the market movements should now feel even weightier on a relative basis compared to the years prior. As Bitcoin breaks its previous all-time high, surges toward $100,000, and captures the attention of Wall Street, investor emotions are going to run very high. It's crucial that we learn to keep our emotions in check during these times.
Failure to manage our emotions puts us at risk of turning into overly optimistic bulls, making premature and overly ambitious price predictions like $250,000, $500,000, and $1 million without implementing profit-taking strategies.
That’s the whole point of this intro.
I'm not suggesting that these numbers won't materialize eventually, and I'm not trying to diminish the excitement or pride you may feel due to your conviction paying off. However, it's essential to maintain composure when others may not. There's no wisdom in jeopardizing a clear advantage. Let's conduct ourselves with the confidence of champions, remember the basics, and behave as if we've been here before. The market will reward our maturity.
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Bitcoin Thoughts And Analysis
Bitcoin continues to struggle at resistance, getting rejected each time it hits the $38,000 area.
The good news is that daily RSI, which was historically overheated, is not reset and back well below overbought. Usually we see a trip back to oversold, but that does not need to happen in the immediate future. We basically have price staying the same with indicators resetting, which is what you want to see.
Legacy Markets
The US stock market is experiencing a period of uncertainty. Despite recent rallies, with the S&P 500 and Nasdaq 100 reaching significant highs, investors are cautious about the sustainability of this growth. Strategists from Goldman Sachs and Citigroup express concerns over economic growth and inflation, and the potential for a short squeeze that could disrupt the rally. This caution is reflected in the stable performance of S&P 500 and Nasdaq 100 futures.
The US dollar continues to weaken, and Treasury yields have dipped following a successful 20-year auction. This situation has influenced the markets to estimate a 30% likelihood of a Federal Reserve rate cut in March. However, the upcoming publication of the minutes from the last rate-setting meeting might provide further insights, potentially indicating a continued openness to rate hikes and a longer period of holding rates steady.
In Europe, the Stoxx Europe 600 index remains steady, buoyed by basic resources shares due to optimism about China's economic stimulus measures. However, banks and energy stocks are not performing as well. Banca Monte dei Paschi di Siena SpA saw a decline after Italy sold a significant stake, and MorphoSys AG’s stock dropped due to mixed results in a drug trial.
Emerging markets are showing strength, with stocks and currencies rising as the weakening dollar boosts demand for riskier assets. Chinese real estate firms are also gaining, supported by government financing initiatives.
In the tech sector, AI company OpenAI, maker of ChatGPT, is undergoing leadership changes, with Microsoft showing a strong performance after hiring key figures from OpenAI. Zoom Video Communications and Nvidia Corp are also in focus with their latest financial results.
Oil prices are fluctuating, with recent gains potentially being affected by OPEC+'s upcoming decisions on supply cuts.
Key events this week:
ECB President Christine Lagarde and German Finance Minister Christian Lindner speak, Tuesday
US existing home sales, Tuesday
FOMC issues minutes from the Nov. 1 policy meeting, Tuesday
Nvidia’s earnings, Tuesday
Canada’s update to the government’s fiscal and economic outlook, Tuesday
Eurozone consumer confidence, Wednesday
US initial jobless claims, University of Michigan consumer sentiment, durable goods, Wednesday
Bank of Canada Governor Tiff Macklem speaks, Wednesday
Eurozone S&P Global Manufacturing & Services PMI, Thursday
Thanksgiving holiday — US markets closed — Thursday
ECB publishes account of October policy meeting, Thursday
Germany IFO business climate, Friday
US S&P Global Manufacturing PMI, Friday
Black Friday, traditional kick-off for the US holiday shopping season
ECB’s Christine Lagarde speaks, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 was little changed as of 9:26 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 rose 0.4%
The MSCI Emerging Markets Index rose 0.5%
Currencies
The Bloomberg Dollar Spot Index fell 0.2%
The euro was little changed at $1.0948
The Japanese yen rose 0.5% to 147.67 per dollar
The offshore yuan rose 0.4% to 7.1374 per dollar
The British pound rose 0.2% to $1.2535
Cryptocurrencies
Bitcoin was little changed at $37,410.58
Ether fell 0.6% to $2,014.47
Bonds
The yield on 10-year Treasuries declined one basis point to 4.41%
Germany’s 10-year yield declined two basis points to 2.59%
Britain’s 10-year yield declined two basis points to 4.11%
Commodities
Brent crude fell 0.8% to $81.65 a barrel
Spot gold rose 0.4% to $1,986.18 an ounce
The ETF Inches Closer
In yesterday's newsletter, I briefly explored the distinctions between 'cash creative' and 'in-kind' structures for ETFs. While not an exhaustive discussion, there is a pertinent detail now surfacing in the interactions between the SEC and filers. Specifically, the tax advantages associated with 'in-kind' ETFs for deploying issuers need brief discussion. Within an 'in-kind' framework, issuers can defer capital gains, minimize taxable distributions, and engage in tax-loss harvesting due to the absence of a taxable event between dollars and Bitcoin. The filers want this.
This information is relevant because ARK, subsequent to their discussions with the SEC, has submitted amendment #3 for their filing, introducing a 'hybrid' model that amalgamates elements of both 'in-kind' and 'cash creative.' I'll refrain from delving into the specific details of this structure, but you get the idea. It will be interesting to see if the SEC accepts this pushback after their encouragement of ‘cash creative.’ While it seems unlikely that ARK would open itself up to rejection of its ETF based solely on structural details, there could be some private jostling occurring behind the scenes. The pivotal date to watch for potential developments is January 10 - mark your calendars.
Binance Wins
I anticipate varying interpretations regarding the implications of a $4 billion settlement for Binance. However, I hold the view that this marks a victory for the exchange. While acknowledging the substantial financial commitment required - undoubtedly a significant amount - Binance generated $12 billion in revenue in 2022 and $20 billion in 2021. Although details are scarce due to the news leak from Bloomberg, negotiations reportedly involve potential criminal charges for CZ. Despite the considerable penalty, this settlement, in my perspective, enables the exchange to endure, ensuring the continuity of operations and allowing a substantial portion of the crypto space to progress - a mutually beneficial outcome. Markets hate uncertainty far more than they hate penalties and new CEOs. If the settlement happens, it would market the removal of a large stain on the industry.
Financial Services Giant, Banco Santander, Is Offering Crypto
High-net-worth clients holding Banco Santander Swiss accounts will now have the opportunity to engage in trading and investment activities involving Bitcoin and Ethereum. As per the official announcement, additional cryptocurrencies meeting the bank's screening criteria are slated to be added over the coming months. Furthermore, I anticipate that cryptocurrency services will eventually be extended to a broader audience, as we have seen with literally every major institution that starts down the crypto path - demand speaks for itself. Did you know that Banco Santander, with over 160 years of history, manages assets totaling $315 billion and serves a customer base of 166 million? The world is rapidly changing.
The SEC Sues Kraken
The SEC has initiated a lawsuit against Kraken, a development that echoes similar actions taken against Coinbase and Binance. I haven't delved into the specifics of the lawsuit yet, as I'm awaiting expert analyses on Crypto Town Hall. However, I anticipate this to be the major story of the week. The assets identified in the lawsuit as securities include Solana, Cardano, Polygon, Internet Computer, Cosmos, Algorand, Sandbox, Decentraland, and Chiliz. Once more legal experts weigh in, I’ll make sure to provide a more thorough analysis here.
Election Shock! Will Argentina Adopt Bitcoin? l Macro Monday
It's Macro Monday with Dave Weisberger, James Lavish, and Mike McGlone.
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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.