The Wolf Den #958 - We Are Doomed
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In This Issue:
We Are Doomed
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
Tether Is Crushing It
BlackRock Continues To Invest In RWA Space
Rates Remain Unchanged
Crypto Market Crash | Will Bitcoin Drop To $50K?
We Are Doomed
I don't know what to do; I am literally shaking. Bitcoin is crashing, altcoins are nuking, and ETF inflows have dried up. The bear market probably started last week and none of us took profits.
We are so f**ked.
If you believed any of that nonsense, thump yourself on the forehead. You deserve it.
The closing price of Bitcoin on May 2, 2023, was $28,749.20.
At $57,000, we are 98% higher than we were this exact time last year. From the bottom of the bear market at $15,787 in 2022, to the high of $73,835 just 1.5 months ago, Bitcoin was up ~367%. Are you not entertained?!
Nobody knows how long the market will chop or how low it will go, but my gut is telling me we have hit a local bottom for the moment. A bottom. Maybe not THE bottom. If you made it to the end of yesterday’s newsletter, I commented that the Fear & Greed Index was broken. Well, it is currently calibrating hard. Take a look at this screenshot I took yesterday afternoon. In the span of a single day, the index reverted by 13 points. By the time you are reading this, it should be in “Fear.” It’s a start.
In other not so great news, look at this:
For clarification, there isn’t an exact number (at least to my knowledge) at which we can definitively say that 50% of buyers are underwater. But this was widely reported. Also, various sources (Standard Chartered and 10x Research) suggest that the average purchase price for the spot Bitcoin ETF is approximately $57,000 or $58,000. The actual percentage of buyers underwater depends on the distribution of purchase prices across all buyers. Even research firms don't have perfect data on this, but assuming the average purchase price is correct, it is increasingly likely or will soon be true that half of buyers are or were underwater, given current price levels. And we are seeing massive outflows - which the mainstream media is already salivating over.
Not great, but not unexpected in a downturn.
Another point I'd like to highlight for perspective is that the SEC approved spot Bitcoin ETFs on January 10, 2024. On that day, Bitcoin was trading at $46,686, only to drop to $38,521 later in the month as the product was live, marking a 17.5% decline during a historic time. It appears that Hong Kong’s ‘disappointing’ launch is repeating this price action.
Also, when Coinbase is cleansing the timeline with facts about market dips, it likely means we are close to the bottom. Credit to them for sticking to the facts and providing insight rather than spreading FUD. From the current cycle top at $73,835 to yesterday's low of $56,789, Bitcoin has faced a 23% decrease, which is not even close to the 30% to 40% decline range typically seen in bull markets.
Ok, that was a lot, and a muddled picture at best.
I think the best course of action from here is to erase all of the stories we've told ourselves over the past few weeks and start fresh. I'm going to list every recent catalyst in no particular order, and as I do so, ask that you erase it from your mind.
The halving, banana zone, Japanese Yen, Republic First Bank seizure, Financial Services GOP hearing, ConsenSys lawsuit, earnings season, Eigen Layer, Friend.tech, IBIT flipping GBTC, Hong Kong ETF launch, MicroStrategy, the infinite money glitch, Base season, airdrop season, Tether’s record quarter, stablecoin growth, Lightning on Coinbase, IBIT entering top 10 for inflow streaks, Crypto Freedom Alliance of Texas suing the SEC, Coinbase earnings, RFK Jr. proposing U.S. budget on blockchain, Runes, Ordinals, Epic Sats, Standard Chartered predictions, major exchanges launching L2s, scripted wars, BUIDL, RWAs, and STRIPE.
You now have a perfectly clean slate.
I must admit, I am pretty burnt out when it comes to writing about price, narratives, and sentiment because there is only so much you can say without speculating. So, I’ll leave this half of the intro at this.
For the second half, I want to share some brief commentary on what the Fed has become, in my eyes. You may not agree, and that's perfectly fine.
Over the past few years, the focus of global markets has drastically shifted to the monthly Consumer Price Index and Fed Funds rate reports, leading to an influx of amateur analysts attempting to decipher the Fed's words and intentions. It’s nonsense.
In 2019, Fed Chair Jerome Powell stated, “we have an obligation to explain ourselves,” signaling a shift in the Fed's approach towards greater communication with the public. This was unprecedented.
A Wharton professor famously said in 2019: “It wasn’t so long ago that the idea of a Fed trying to ‘explain’ itself was blasphemy. The Fed’s communication is a tortured history. I think of The Wizard of Oz. I think of the Fed trying to be the wizard to the citizens of Emerald City, but now trying to say, well, we should invite the visitors from Kansas behind the curtain.”
I don’t find the Fed interesting; I find Bitcoin interesting. Nevertheless, you can’t ignore the profound impact this institution has on markets. If the Fed had decided to hike or cut rates yesterday, the market would probably have gone into a frenzy. Instead, the decision was deferred, giving Bitcoin the green light to continue its journey of siphoning value from every asset on the planet.
I believe what Powell is saying; we have no reason not to, but I don’t trust that the Fed has what it takes to address issues like monetary debasement, rising debts, or unreported inflation. At this point, these are problems far beyond the control of the Fed. While the Fed's transparency might be beneficial, the market is increasingly diverting its attention from their actions, paving the way for new opportunities and potential growth outside the traditional system.
At times, Bitcoin may align with the movements of other risk assets, but I would argue that it has now decoupled from all major asset classes. The seeds that were planted have now flourished, and Bitcoin is capable of experiencing independent, unique growth. The influence of the Fed is waning, so let’s turn our attention to brighter, more promising prospects. This year and 2025 should and will be about Bitcoin.
Don’t get caught up in the chaos; stack sats and play it cool. Valhalla still awaits you.
We are not doomed. Everything else may be.
Bitcoin Thoughts And Analysis
I failed to comment on the monthly close yesterday, which was a bit of a miss on my part. As you can see, we have a massive bearish engulfing candle, not an ideal signal for “up only” bulls that expected no more corrections in this “new paradigm.”
We will have to see how this month closes - if it is red, it confirms April’s ugly candle, the first since last August.
This looks “toppy” for now, but monthly charts are hard to read and Bitcoin can always pull a Bitcoin.
Perhaps more notably, Trading Alpha gave a clear buy signal in the 20Ks, again in the 40Ks and remains bullish. Still grey dots, still above track line, track line is green. This indicator is pretty amazing.
As for lower time frames, we do have bullish divergence with oversold RSI again on the 4-hour, which showed us a nice bounce back to around $59,000 and is still technically valid. The daily is yet to hit oversold, still.
Altcoin Charts
For those who are new here, I share SETUPS and not SIGNALS. These are ideas that I am watching - if a certain thing happens, then the trade triggers. I am not telling you what to buy or when. I am showing you how I am watching certain charts and what has to happen for me to take a trade.
This is not a trade or a signal, but rather some sweet, sweet hindsight to give some perspective on where we are at. Bitcoin Dominance is obviously Bitcoin’s share of the entire market place. When it is rising, that means that you would generally rather be in Bitcoin than altcoins (select altcoins usually outperform regardless), and when it is dropping you want to be “beating” Bitcoin as a trader by being in altcoins.
Well, as you can see, it is been effectively “up only” since late 2022. Has it topped? I have no idea, but it is nice to see a tiny but of relief the past few weeks, even as Bitcoin has corrected.
This big blue arrow simply illustrates how difficult it is to “beat” Bitcoin.
Legacy Markets
US stock futures saw gains as market sentiment was buoyed by the Federal Reserve's indication that a rate hike is unlikely in the near future. This news came despite ongoing concerns about persistent inflation. Chair Jerome Powell emphasized that any decision to increase rates would require clear evidence that the current policy is insufficient to achieve the 2% inflation target.
The markets responded positively, with S&P 500 futures climbing 0.6% and notable pre-market gains for major companies like Apple, Amazon, and Nvidia. The yen experienced volatility, with big swings amid rumors of intervention by Japanese authorities to support the currency.
In Europe, stock movements were more subdued, with mixed company earnings reports influencing the markets. Novo Nordisk and Moller-Maersk saw declines, while Shell advanced after reporting a profit increase and announcing a significant share buyback.
Looking ahead, the focus in the US will shift to upcoming economic data releases, including jobless claims, factory orders, and particularly the April non-farm payrolls, which are expected to remain strong, potentially challenging the Fed's stance on interest rates.
Additionally, Apple's upcoming earnings report is highly anticipated, providing insights into how the company is managing a sales downturn, especially in the sluggish Chinese market. In Asia, the Hang Seng Index surged, nearing bull market territory, buoyed by Hong Kong's currency stability amid global financial uncertainty. Meanwhile, in commodities, oil prices rebounded and gold prices rose.
Key events this week:
US factory orders, initial jobless claims, trade, Thursday
Apple earnings, Thursday
Eurozone unemployment, Friday
US unemployment, nonfarm payrolls, ISM Services, Friday
Chicago Fed President Austan Goolsbee speaks, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 fell 0.2% as of 10:17 a.m. London time
S&P 500 futures rose 0.4%
Nasdaq 100 futures rose 0.6%
Futures on the Dow Jones Industrial Average rose 0.2%
The MSCI Asia Pacific Index rose 1%
The MSCI Emerging Markets Index rose 0.5%
Currencies
The Bloomberg Dollar Spot Index fell 0.5%
The euro was little changed at $1.0709
The Japanese yen fell 0.4% to 155.17 per dollar
The offshore yuan was little changed at 7.2288 per dollar
The British pound was little changed at $1.2530
Cryptocurrencies
Bitcoin rose 0.7% to $57,705.13
Ether was little changed at $2,936.74
Bonds
The yield on 10-year Treasuries declined two basis points to 4.61%
Germany’s 10-year yield declined four basis points to 2.55%
Britain’s 10-year yield declined six basis points to 4.31%
Commodities
Brent crude rose 0.9% to $84.35 a barrel
Spot gold fell 0.6% to $2,304.86 an ounce
Tether Is Crushing It
Despite the market's widespread bloodbath, the Tether machine continues to churn, achieving another record-breaking net profit for the quarter - totaling $4.52 billion. The majority of these gains, over $1 billion, derived from US Treasury holdings, with the remainder from Bitcoin and gold positions. At the close of Q1, the company surpassed the $90 billion mark in US treasury ownership, setting $100 billion as the next major target. During this quarter alone, over $12.5 billion USDT was issued. The report has yet to detail Tether's latest $5 billion investment in AI and Data, Renewable Energy, P2P communication, and BTC Mining. However, it will be intriguing to see how these businesses perform in the future.
“With the first attestation of 2024, Tether has demonstrated its unwavering commitment to transparency, stability, liquidity, and responsible risk management. As shown in this latest report, Tether continues to shatter records with a new profit benchmark of $4.52 billion, reflecting the company’s sheer financial strength and stability. In reporting not just the composition of our reserves, but now the Group’s net equity of $11.37 billion, Tether is again raising the bar in the cryptocurrency industry in the realms of transparency and trust,” said Paolo Ardoino, CEO of Tether.
BlackRock Continues To Invest In RWA Space
Securitize, the company behind the creation of BlackRock’s BUIDL token, has just announced the successful completion of a $47 million funding round led by none other than BlackRock. Also included in the round were notable companies such as Hamilton Lane, ParaFi Capital, and Tradeweb Markets, along with strategic investors Aptos Labs, Circle, and Paxos.
I would say it is obvious that BlackRock believes this investment will yield a return and enable them to continue advancing in the RWA space. However, the real strategic move is that BlackRock, through this investment, has secured a seat on Securitize’s Board of Directors. BlackRock now has a direct hand in what it is trying to create. According to the press release, “Securitize will leverage the proceeds of the funding round to accelerate product development, expand its global footprint, and further strengthen its partnerships across the financial services ecosystem.”
Rates Remain Unchanged
Jerome Powell used the same language yesterday as he did in the January and March meetings. Nothing unique here. The CME FedWatch Tool is currently predicting a 25-basis point cut in target rates for the November 7 Fed meeting, which you can view below. What is remarkable about all this is how wrong market participants are about the Fed’s long-term plan. After the January Fed meeting, markets were pricing in 7 interest rate cuts at every following meeting, starting in March. Look where we are now.
Crypto Market Crash | Will Bitcoin Drop To $50K?
Some analysts predict Bitcoin can drop to $50,000. What are the chances it happens, and what are the possible scenarios for Bitcoin and crypto? I am discussing this and more with Joshua Frank, Co-Founder & CEO of The Tie, the leading information services provider for digital assets. Chris Inks will join us in the second part to share some interesting trades in crypto and beyond.
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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.
Everyday I have the pleasure of starting out with this. I love it. But, today’s stood out. Exceptional. You nailed it. Thanks, Scott.