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In This Issue:
Don't Be A Sheep
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
Bitcoin’s Hashrate — A Deep Look
BUIDL Integrates With USDC
Bitcoin Prevails In South Korea
Don't Be A Sheep
1989 was a tumultuous period for financial markets.
On Friday, October 13th, the Dow Jones Industrial Average dropped by 6.9%, an event known as "The Friday The 13th Mini-Crash." This occurred just two years after the infamous Black Monday crash in 1987, when the Dow plummeted by 22.6%, marking the largest single-day stock market decline in history. The events of 1987 left investors rattled, and the events of 1989 brought back fresh and unwelcome memories of that time. Amidst this turbulent period, my favorite comic was published in the Baltimore Sun, humorously titled "Just a normal day at the nation’s most important financial institution…"
See below for the comic strip.
This joke resonates with investors because it's self-explanatory and relatable to anyone involved in the market. It highlights the cyclical nature of market madness, driven by the fact that humans often fail to learn from past mistakes. The cartoonish portrayal of stockbrokers rapidly shifting from fear to greed, influenced by the sounds of words, underscores the whimsical and often irrational behavior seen in markets. The more we contemplate the image, the more it reveals about human nature and the lessons we can draw from it.
Although these men are working on Wall Street and donning suits and ties, (as is still the case today) these are the type of guys that good investors counter-trade to make a fortune. The herd is rarely right - it is the shepherd who profits from that herd.
Sadly, the example does not just work for spastic Wall Street traders. It applies to all of us.
Doctors, dancers, lawyers, and lifeguards are all equally susceptible to herd mentality when they step into the market, a unique ecosystem that requires mastery like any other.
My simple suggestion? Think before you act, and question the “wisdom” of the crowd, especially in a down market. When everyone is panicking, keep a cool head and look for assets on sale. Don’t sell just because everyone is screaming.
The greatest investors of all time agree.
“Some people get rich studying artificial intelligence. Me, I make my money studying natural stupidity.” - Carl Icahn
“I love quality merchandise at a deep discount, whether it’s stocks or socks.” - Warren Buffet
Don’t be a sheep.
Bitcoin remains rangebound to the previous cycle ATH going into the halving, which likely means the next move is going to be a strong one. Narratives are bullish right now, so my bias remains up in the short-term and of course up in the long-term, which I am far more confident about.
The key takeaway from today's discussion is that, regardless of the evolving narrative and the consensus on Bitcoin's peak price in this cycle, it's likely that Bitcoin will overextend and experience another bear market, as it has always done. I assign a very low probability to this cycle being the one where Bitcoin only moves upwards or sideways indefinitely without a significant correction. We're witnessing many of the same patterns unfold as we've seen before.
Bitcoin Thoughts And Analysis
Trading Alpha is giving mixed signals on the daily chart at the moment, so I am watching and waiting. We have quite a few “Ts” which indicate potential tops, but the dots are still green and we do have squeeze shading - which indicates a bigger move is coming, but does not tell us the direction. The weekly chart still looks very bullish, but I am just sitting on the sidelines observing as a trader.
Altcoin Charts
I am currently seeing quite a bit of weakness across the altcoin market, so it is hard to find any specific opportunities today. We will revisit the market on Monday and see if things have changed.
Legacy Markets
U.S. equity futures dipped slightly as investors prepared for the upcoming earnings reports from major Wall Street banks, highlighting a busy week in financial markets influenced by potential changes in interest rate policies. Notably, JPMorgan Chase & Co., along with Wells Fargo & Co. and Citigroup Inc., are set to begin the U.S. first-quarter earnings season, with a particular focus on their financial outlooks and key revenue areas such as net interest income and investment banking.
Meanwhile, in Europe, stock markets surged, fueled by rising commodity prices amid ongoing tensions in the Middle East and positive demand outlooks. This pushed the price of Brent crude oil above $90 per barrel and gold to a record high of over $2,400 an ounce.
The euro weakened significantly against the dollar due to growing expectations that the European Central Bank (ECB) might start cutting interest rates as early as June, ahead of any similar moves by the U.S. Federal Reserve, which is grappling with persistent inflation.
In the bond markets, yields on 10-year U.S. Treasuries fell following data indicating a slower-than-expected rise in U.S. producer prices, despite a previous uptick in consumer price inflation.
The outlook for corporate earnings remains robust, with projections suggesting a 3.8% year-over-year increase in earnings per share for S&P 500 companies. The tech sector, in particular, is expected to show significant gains, with earnings potentially up by 38% for major firms like Apple, Microsoft, and Amazon.
Finally, commodity markets continued to rally, with iron ore, copper, aluminum, and zinc all experiencing price increases due to an improving demand outlook and supply concerns, further exacerbated by geopolitical tensions that are influencing both oil and precious metals markets.
Key events this week:
China trade, Friday
US University of Michigan consumer sentiment, Friday
Citigroup, JPMorgan, BlackRock Inc., State Street Corp. and Wells Fargo due to report results, Friday
San Francisco Fed President Mary Daly speaks, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.2% as of 6:12 a.m. New York time
Nasdaq 100 futures fell 0.4%
Futures on the Dow Jones Industrial Average were little changed
The Stoxx Europe 600 rose 1%
The MSCI World index was little changed
Currencies
The Bloomberg Dollar Spot Index rose 0.4%
The euro fell 0.7% to $1.0656
The British pound fell 0.5% to $1.2492
The Japanese yen was little changed at 153.32 per dollar
Cryptocurrencies
Bitcoin rose 0.2% to $70,645.51
Ether fell 0.3% to $3,513.15
Bonds
The yield on 10-year Treasuries declined five basis points to 4.54%
Germany’s 10-year yield declined eight basis points to 2.38%
Britain’s 10-year yield declined four basis points to 4.16%
Commodities
West Texas Intermediate crude rose 1.3% to $86.11 a barrel
Spot gold rose 1% to $2,397.39 an ounce
Bitcoin’s Hashrate — A Deep Look
The 4th Bitcoin halving is just one week away! Below, I've shared details on what a mining pool is, as it will be a major topic of discussion, along with some charts that show which ones are currently dominating. Mining is not an easy business, and the pools success, along with the strength of miners, are liable to change depending on all sorts of factors: the cost of energy, hash rate (of course), regulation, mining difficulty, Bitcoin’s price, and hardware costs.
“A mining pool is a group of miners who share their computing power over a network and get rewarded based on the amount of power each contributes as opposed to whether or not the pool finds a block. Mining pools help make revenue for miners more predictable. Huge drops in weekly numbers could highlight that some mining pools are either being turned off or they have decided to mine other currencies. If a mining pool were to control more than half of the total hashrate, it could (while unlikely) lead to a 51% attack on the network.”
Pool Distribution:
Pools Distribution:
Pools By Country:
Is it just me, or isn't it crazy that China is leading here despite a country-wide ban in 2021? To me, it's more proof that Bitcoin is unbannable than an indication that China doesn't really care. While miners did leave for a short time, they have simply come right back.
BUIDL Integrates With USDC
There's something special about discovering crypto use cases that seamlessly integrate into the real world. A major critique of crypto is that our innovations often seem to benefit only our sector, without creating a net positive impact. While I see the validity of this argument, if we envision a future where our system becomes dominant, does it truly matter if our technology initially serves just our interests? Ultimately, the future will likely entail a convergence between tradfi and crypto, promising the most significant advancements for both sectors.
Now that my rant is up, Circle made a significant announcement: BUIDL holders can now utilize a smart contract function created by Circle to redeem shares of BUIDL for the stablecoin USDC. What's remarkable about this innovation is that prior to this news, BUIDL holders lacked options with their shares. This development enables money to flow seamlessly into the crypto space, moving further away from tradfi and into other assets like Bitcoin and Ethereum. In just a couple of weeks since its launch, BUIDL has risen to the number 2 position with $288 million in AUM, trailing behind Franklin Templeton's much older product BENJI, which stands at $363 million.
Jeremy Allaire said the following about the development: “Tokenization of real-world assets is a rapidly emerging product category. Tokenizing assets is but one important dimension of solving investor pain points. USDC enables investors to move out of tokenized assets at speed, lowering costs and removing friction. We’re thrilled to provide this functionality to BUIDL investors and deliver the core benefits of blockchain transactions via USDC availability to investors.”
Bitcoin Prevails In South Korea
A pivotal political election took place this week in South Korea, where two opposing parties vied for legislative seats, each with slightly different stances on rules, laws, and proposals related to Bitcoin and crypto. The more favorable of the two parties won, which is promising news. However, both parties were likely to be pro-crypto. For instance, the Democratic Party of Korea (DPK) has pledged to allow investors to purchase spot bitcoin BTC exchange-traded funds, while the conservative People Power Party (PPP) has also expressed interest in enabling such ETFs. Additionally, apart from the ETF promises, the DPK has committed to developing a regulatory framework and fair laws regarding taxes and gains. Overall, it was a win-win situation for Bitcoin.
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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.