The Wolf Den #856 - When And How Should I Sell My Crypto
If you fail to plan, you are planning to fail.
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In This Issue:
When And How Should I Sell My Crypto?
Bitcoin Thoughts And Analysis
Stock Markets Retreat as November Rally Shows Signs of Fading
Demand Is Here
Don’t Fetch The Banana
CZ Ordered To Stay In The U.S.
Calm Before The Storm - Is Bitcoin The Lifeboat? Macro Monday
When And How Should I Sell My Crypto
Assuming we can all agree we are in a bull market, the biggest question for investors becomes - when and how should I sell my crypto? Even if you already had a plan in place, it’s not a bad idea to reconsider where you plan on taking profits and in what manner you will do so. Below is a framework of personal and contextual variables that one should consider in their profit taking plan for the best possible exit.
*If you belong to the 'never selling crypto camp,' then this segment may not be tailored to your perspective. However, it's worth noting that everything that goes up eventually falls to some degree for a certain period of time.*
I like to begin this endeavor with the following question: Do you have a target in mind?
If you intend to merely 'read' the market without establishing fixed take-profit levels, you are susceptible to falling victim to your emotions when it comes time to sell. In both 2017 and 2021, many investors failed to secure profits because they clung to their portfolios, aiming to time the market's peak or extract additional gains, only to realize that the rally had ended and prices were declining for good. To secure profits effectively, your strategy should incorporate predetermined levels at which you intend to sell portions of your portfolio, distributing them at each specified stop. This brings me to my next question...
How Should I Scale Out?
If you scaled into the market rather than making a lump sum purchase, consider scaling out in a similar manner. If you're thinking about selling all at once because you bought everything in one go and it's doing well, ask yourself if you entered the market at the perfect time. The likely answer is ‘no.’ Therefore, it's advisable to exit your position gradually, following the same approach as an experienced investor entering the market.
The process of scaling out should begin on a really green day and commence well before you believe the market has reached its peak. This could mean selling a minimal percentage, such as 1% or even 0.1%, to gradually acclimate yourself to the practice of emotionally detaching from your position. While it might be uncomfortable to chip away at your position, I promise you will thank yourself at a later date.
You might be wondering, even if I decide to scale out, how can I responsibly estimate where the market top might be? This leads us to the next segment.
Find Your Favorite Model
This decision constitutes a pivotal aspect of the selling equation. While there are reputable industry experts discussing Bitcoin potentially reaching $500,000 and $1 million, relying on such price levels being achieved this cycle appears more improbable than probable—especially if one considers past data as a guide to future trends. Currently, widely accepted models suggest Bitcoin's peak price will likely fall within the range of $100,000 to $300,000.
Personally, I find models such as Willy Woo’s Top Cap Model and The Bitcoin Rainbow Chart appealing, although I put little stock in any of them for my personal investment decisions. It's important to note that the popularity of price predictive models is somewhat outdated. Nowadays, more emphasis is placed on fundamental predictions that consider factors such as Wall Street involvement, the gold market, and nation-state adoption. Beauty is in the eye of the beholder.
How Much Profit Do You Desire?
This is the most personal aspect of the sell equation, but I can offer some guidance on how you should begin to answer the question. Once you have a model in mind, attempting to pinpoint the exact top or set of tops becomes increasingly risky. It's a prudent strategy to establish a desired end-profit goal. Consider factors such as your age, financial reserves, the proportion of crypto in your portfolio, and your overall risk tolerance.
If you are already financially secure and crypto constitutes a small portion of your net worth, scaling out of your position on the way to the cycle top is a reasonable approach. On the other hand, if you are young, without significant financial responsibilities, and a substantial part of your net worth is in crypto, maybe it does make sense to swing for the fences.
It's wise to consider three net profit figures: one that would satisfy you, one that would please you, and one that is your wishful goal. Within the parameters of your chosen models, work backward to outline scenarios and how these three net profit figures can be achieved. This entails establishing average sell goals for each position in your portfolio that are categorized as low, medium, and high.
If You Aren’t A Perfect Buyer, You Aren’t A Perfect Seller
If you made it this far and you feel that the suggested strategies above don’t apply to you because your plan is to sell at the top, do this one exercise. Since your first entry into Bitcoin or any coin, circle on the price chart every time you have bought. If your average purchase price was equal to or close to the lowest price in this time frame, then maybe you have a shot at timing the top. If the majority of your purchases were not on a dip and could have been better timed, this probably tells you that you were not perfect on the way up, so you won’t be perfect on the way down. Next to nobody has perfect entries, so don’t count on a perfect exit. Fear is a strong emotion, but greed is much more potent and likely to cloud your judgment. So, when the cycle peak is approaching and absolute euphoria kicks in, don’t count on perfection, count on your plan.
Hopefully this intro gives you some context to begin thinking about the sell question.
If you fail to plan, you are planning to fail.
Bitcoin Thoughts And Analysis
Nothing to see here.
Bitcoin continues to struggle with the overhead resistance zone, drawn back to the LUNA collapse. It will take a major push from bulls to get through.
Stock Markets Retreat as November Rally Shows Signs of Fading
Stock markets are experiencing a pullback, with both European stocks and US futures signaling a downturn. This shift suggests that the strong November rally might be losing its momentum.
European Markets and S&P 500 Under Pressure
The European Stoxx 600 index has seen a decline of 0.6%, and there's a noticeable dip in the futures of the S&P 500. Notably, the luxury sector in Europe, led by companies like LVMH, is facing a downturn. This comes as HSBC Holdings Plc reduced its price targets for the sector, signaling a cautious stance. Additionally, the Dutch biotech firm Argenx SE witnessed a sharp fall of up to 17% following the disappointing trial results of its sole medicine.
Dollar Weakens, Treasury Bonds Hold Steady
The dollar is edging lower, heading towards its most significant monthly drop in a year. In contrast, Treasury bonds have managed to hold their ground, maintaining the gains from the previous session. This dynamic in the currency and bond markets reflects the shifting investor sentiments as we approach the year's end.
Citigroup's Take on the S&P 500 Rally
A noteworthy perspective comes from Citigroup Inc. strategists who suggest that the S&P 500's exceptional November rally, one of its best in a century, is now showing signs of fatigue. Their analysis indicates a "slightly bearish" net positioning for the benchmark index, hinting at possible cautious or defensive moves by investors.
Central Banks and Monetary Policy Outlook
The central banking sector adds another layer of complexity, with officials from Australia, England, and Thailand expressing uncertainty about future monetary policies. A significant statement came from Joachim Nagel, President of the European Central Bank, emphasizing that it's premature to consider reducing borrowing costs.
US Markets Post-Thanksgiving and What's Next
Post-Thanksgiving, US markets are seemingly taking a breather, which in turn affects the European markets. Looking ahead, the financial community is keenly awaiting speeches from Federal Reserve officials and key economic data, including the Federal Reserve's preferred measure of underlying inflation.
Commodities: Gold and Oil
In the commodities market, gold prices are stable, hovering near their highest level since May. Meanwhile, oil is seeing a reversal of its three-day decline, fueled by speculations about potential deeper output cuts from OPEC+.
Key events this week:
Meeting of NATO foreign ministers in Brussels, Tuesday-Wednesday
ECB governing council member Pablo Hernandez de Cos and Bank of England Deputy Governor Dave Ramsden speak, Tuesday
US Conference Board consumer confidence, Tuesday
Fed Governor Chris Waller speaks, Chicago Fed President Austan Goolsbee speak, Tuesday
New Zealand rate decision, Wednesday
OECD releases biannual economic outlook, Wednesday
Eurozone economic confidence, consumer confidence, Wednesday
Bank of England Governor Andrew Bailey speaks, Wednesday
US wholesale inventories, GDP, Wednesday
Cleveland Fed President Loretta Mester speaks, Wednesday
Fed releases its Beige Book, Wednesday
China non-manufacturing PMI, manufacturing PMI, Thursday
OPEC+ meeting, Thursday
Eurozone CPI, unemployment, Thursday
US personal income, PCE deflator, initial jobless claims, pending home sales, Thursday
China Caixin Manufacturing PMI, Friday
Eurozone S&P Global Manufacturing PMI, Friday
US construction spending, ISM Manufacturing, Friday
Fed Chair Jerome Powell to participate in “fireside chat” in Atlanta, Friday
Chicago Fed President Austan Goolsbee speaks, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 fell 0.6% as of 11:22 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 0.2%
The MSCI Emerging Markets Index rose 0.5%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0955
The Japanese yen was little changed at 148.61 per dollar
The offshore yuan was little changed at 7.1607 per dollar
The British pound was little changed at $1.2634
Cryptocurrencies
Bitcoin rose 0.4% to $37,168.44
Ether rose 0.4% to $2,023.37
Bonds
The yield on 10-year Treasuries advanced one basis point to 4.40%
Germany’s 10-year yield was little changed at 2.55%
Britain’s 10-year yield was little changed at 4.22%
Commodities
Brent crude rose 1.1% to $80.83 a barrel
Spot gold was little changed
Demand Is Here
According to a report from CoinShares, digital asset investment products have witnessed the most substantial weekly inflows in a nine-week consecutive streak, totaling $346 million. These inflows mark the most significant surge since the bull market of late 2021. Adding to the excitement, the report notes that the attention of larger players is not limited to Bitcoin alone, stating, “Ethereum saw $34 million inflows last week, almost correcting its run of outflows this year, marking a decisive turn-around in sentiment.”
If I were to prompt you to guess which two countries are leading in weekly institutional inflows, you might be surprised to learn that Canada ($199 million) and Germany ($101.5 million) are the correct answer. Consider the potential impact on Bitcoin's price when the United States and China take the lead. Despite Wall Street's growing interest in crypto, institutional involvement in the U.S. remains relatively low. Last week, the U.S. experienced $30 million in weekly inflows into crypto products, a modest amount compared to what could be on the horizon.
Don’t Fetch The Banana
My 2023 Bingo card didn't anticipate the convergence of 'scam' and 'banana' in the same square, yet here we are, trying our best to keep our funds safe. The scam initially surfaced within the BAYC NFT community but serves as a cautionary tale for anyone openly sharing ownership of a high-value NFT. In a clever ruse, a fraudulent Forbes editor orchestrated Zoom calls with BAYC group members, establishing trust through extensive interviews. The scammer then requested the interviewee to fetch a banana for a photo op, exploiting this momentary distraction to breach the computer unnoticed. Fortunately, the original victim thwarted the scam by refusing to leave the screen and catching the imposter in the act. Nevertheless, the incident underscores the sophisticated tactics employed by scammers in our space, forcing us to be vigilant around the clock.
CZ Ordered To Stay In The U.S.
The DOJ has ruled that CZ can remain free until his sentencing but is required to stay within the U.S. until his court date due to concerns about him being a flight risk. This decision closes any possibility of him evading sentencing in the UAE. At this point, all we can do is hope for leniency from the court in CZ's case.
Calm Before The Storm - Is Bitcoin The Lifeboat? 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.