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In This Issue:
F-O-M-C
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
FTX Is Still A Mess
Crypto And AI Will Be Epic
Elizabeth Warren Begs For Rate Cuts
This Chinese Bank Is Praising Bitcoin And Ethereum
Bitcoin Sinks | Here Is What Happened And What To Do Now (Buy The Dip)
F-O-M-C
Eight times a year, a group of influential policymakers convenes to set economic policies that profoundly impact the value of everything we own, consume, and experience. Their decisions shape the financial landscape and reverberate through our daily lives.
The seven governors, who serve 14-year terms, wield significant power. They are appointed by the President and confirmed by the Senate. The only officials who typically outlast them in their positions are Supreme Court Justices, who serve for a lifetime, subject to good behavior.
The decisions of these individuals not only deeply affect Americans but also have global implications, as the United States continues to exert dominance in banking, capital markets, and fiat currency worldwide.
Today, these individuals will meet for the fourth time this year to deliberate on policy, form opinions on the market and economy, and ultimately decide on the necessity of rate cuts. While I've always maintained that the market and Bitcoin will act independently, significant shifts in tone or posture are bound to have lasting and far-reaching effects.
Interestingly, these meetings have had a notable impact on a particular asset class that operates outside traditional markets: cryptocurrency. Both risk-on and risk-off assets tend to experience heightened volatility in the days surrounding these meetings, with Bitcoin and the broader cryptocurrency market often standing out as the most reactive.
A trend has emerged, which I believe has not garnered sufficient recognition.
I conducted a retrospective analysis of Bitcoin's response to these meetings, beginning with the most recent and going back to the middle of last year. While volatility isn't perfectly aligned from meeting to meeting, the patterns are remarkably consistent. It's almost as if one could predict the timing of FOMC meetings just by looking at the chart. See below for the results.
I didn’t adhere to strict guidelines when collecting this data; at most, I looked just a couple of days before or after the meeting. Barely a stretch.
2024 FOMC Meetings:
June 11-12: $70,000 to $66,500 then… TBD
April/May 30-1: $64,500 to $57,000 then springs back in a few days
March 19-20: $67,500 to $61,500 then springs back same day
Jan 30-31: $43,500 to $42,000 then springs back in one day
2023 FOMC Meetings:
Dec 12-13: $43,800 to $40,700 then springs back same day
Oct/Nov 31-1: $34,500 to $35,600 then falls back in a couple of days
Sep 19-20: Insignificant volatility
July 25-27: Insignificant volatility
June 13-14: Insignificant volatility
What you will notice is that the FOMC tends to have a more pronounced impact when the market is already in a reactive state. For example, from June 2022 to September 2023, Bitcoin price action was relatively stable. However, in October 2023, Bitcoin began to rise, and subsequently, FOMC meetings became highly volatile profit-taking/deleveraging opportunities for the market.
Based on this data, my prediction is that Bitcoin will experience a sharp upward move in the next few days, rebounding most, if not all, of the drop. I’m not taking a trade based on this hunch, and neither should you. My thoughts should never dictate your strategy, but that’s my guess. Any deviation from this trend would mark a departure from the four/five consecutive, nearly identical data points we've observed leading up to this point.
Moreover, an unaccounted-for hiccup, nose scratch, or twitch of the right arm from Jerome Powell could send the market into a frenzy. I don’t make the rules; they do.
The trend remains upward; do not risk your Bitcoin with leverage unless you are extremely confident, well-capitalized, and comfortable with the possibility of 100% losses.
Godspeed. Valhalla awaits.
Bitcoin Thoughts And Analysis
I am beginning to annoy myself. The compulsion to share a bitcoin chart in every newsletter, every day is problematic, when we all know that nothing has changed.
Months of sideways were expected, and that is what we are getting.
And at the moment, a highly predictable bounce (hopefully it lasts) at support in the middle of the range.
Yawn.
Side note, another dip would likely give us bullish divergence with oversold RSI on the 4-hour chart…
Legacy Markets
European stocks rebounded after several days of political upheaval in France, with traders anticipating potential disruptions from forthcoming US inflation data and the Federal Reserve’s interest rate decision. The Stoxx 600, led by banks, rose by 0.4%, snapping a three-day losing streak. French 10-year bonds made modest gains, while US stock futures were set to extend their rally. The dollar remained firm after four days of gains, and Treasuries edged higher.
Volatility in European assets subsided following the unexpected gains of the French far-right in the European Parliament elections. However, the calm might be temporary with the upcoming US CPI data and Fed rate forecasts. Analysts suggest that the economic data and Fed announcement could significantly influence the global market mood for the rest of the month and part of the summer.
Expectations are that the Federal Reserve will maintain borrowing costs at a two-decade high, but there is uncertainty about the Fed’s quarterly rate projections. Bloomberg Economics predicts the dot plot will show two 25-basis-point cuts this year. A significant market reaction is anticipated if this forecast holds true, potentially supporting new highs in the S&P 500.
Notable stock movements included a 16% surge in Rentokil Initial Plc and a record high for Oracle Corp. after positive premarket trade and strong booking reports. Meanwhile, Hong Kong’s benchmark closed over 1% lower, with concerns about weak demand in China as consumer price gains remained above zero and factory-gate prices stayed in deflation. Oil prices extended gains due to shrinking US crude stockpiles, despite forecasts of a major surplus from the International Energy Agency.
Key events this week:
US CPI, Fed rate decision, Wednesday
G-7 leaders summit, June 13-15
Eurozone industrial production, Thursday
US PPI, initial jobless claims, Thursday
Tesla annual meeting, Thursday
New York Fed President John Williams moderates a discussion with Treasury Secretary Janet Yellen, Thursday
Bank of Japan’s monetary policy decision, Friday
Chicago Fed President Austan Goolsbee speaks, Friday
US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 rose 0.4% as of 10:24 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 was little changed
The MSCI Emerging Markets Index rose 0.4%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro rose 0.1% to $1.0752
The Japanese yen was little changed at 157.28 per dollar
The offshore yuan was little changed at 7.2680 per dollar
The British pound rose 0.1% to $1.2754
Cryptocurrencies
Bitcoin rose 0.2% to $67,440.95
Ether rose 0.9% to $3,518.24
Bonds
The yield on 10-year Treasuries declined one basis point to 4.39%
Germany’s 10-year yield declined two basis points to 2.60%
Britain’s 10-year yield declined two basis points to 4.25%
Commodities
Brent crude rose 1% to $82.77 a barrel
Spot gold fell 0.1% to $2,314.64 an ounce
FTX Is Still A Mess
Just last week, I wrote a short news piece detailing a list of objections and demands FTX creditors were submitting to the judges. Now, there is news that the FTX debtors, the entity responsible for managing the bankruptcy, have “filed a motion to authorize a second phase of investigation into issues surrounding the collapse of the US crypto exchange.”
According to the filing, the investigation will examine the extent of Sullivan & Cromwell's relationship with Sam Bankman-Fried, assess claims against former shareholders of Ledger Holdings who sold their positions before the bankruptcy, and address general discrepancies in the balance sheet. The investigation is expected to take 10 weeks and cost approximately $3 million.
This second phase will delve into allegations that FTX paid off whistleblowers, along with a variety of other questionable activities too numerous to detail here. The overarching message is that there remains a great deal to uncover in the FTX bankruptcy scandal, and creditors continue to bear the brunt of the fallout. Hopefully, these investigations play to the creditors’ benefit.
Crypto And AI Will Be Epic
Bitwise, a leading crypto asset manager, released their latest Monday memo, exploring the intersection of AI and cryptocurrency. They argue that these two transformative forces have the potential to contribute an additional $20 trillion to the global economy by 2030.
The article opens by noting that most discussions at Consensus centered around AI and cryptocurrency. This focus is understandable, given that these conferences are at the cutting edge of innovation, and NVIDIA was experiencing a remarkable surge at the time.
“Bitcoin miners—the computer networks that secure the Bitcoin blockchain—are built for the sole purpose of processing and storing gargantuan amounts of data. In other words, they have the very resources—powerful chips, state-of-the-art cooling systems, and accompanying infrastructure—that AI companies are desperate for.”
Just recently, Core Scientific turned down a $1.6 billion acquisition offer from AI cloud provider CoreWeave, highlighting the highly desirable position Bitcoin miners are in. This rejection underscores the intense interest AI companies have in the mining sector. We can probably expect numerous acquisitions and partnerships in the mining industry in the near future.
The article also explores other crossovers, such as blockchains playing a “pivotal role in putting checks and balances on AI” and “pairing AI assistants with smart contracts.” Yesterday, I discussed the significant growth potential of the RWA space, and I consider AI to be in a similar category. Both of these advancements will serve as substantial tailwinds for crypto in the coming years.
Elizabeth Warren Begs For Rate Cuts
Rate cuts in the U.S. are in the news again, due to Elizabeth Warren and Jack Rosen sending a letter to Chairman Jerome Powell requesting them. The contents of the letter are straightforward: major banks worldwide have started to cut rates, target inflation is near (they are claiming), and home and auto prices are driving up the numbers.
Remember - the Fed is NOT supposed to be political.
“The Fed’s monetary policy is not helping to reduce inflation. Indeed, it is driving up housing and auto insurance costs—two of the key drivers of inflation—threatening the health of the economy and risking a recession that could push thousands of American workers out of their jobs.”
“In addition to having the opposite of its intended effect, the Fed’s decision to keep interest rates high continues to threaten the economy. Many economists agree that “inflation has fallen enough that the Fed should start cutting rates before it causes more severe economic damage.”
This Chinese Bank Is Praising Bitcoin And Ethereum
ICBC is no ordinary bank; the Industrial and Commercial Bank of China is the world’s largest lender. It recently published a report likening Bitcoin to gold and Ethereum to digital oil. A lot was said about each of these assets, so I’ll briefly summarize some of the main points below.
Bitcoin: The report highlights Bitcoin's ability to maintain scarcity through its mathematical consensus mechanism, addressing issues of divisibility, authenticity, and portability. Despite its diminishing monetary attributes, Bitcoin's status as an asset is solidifying.
Ethereum: Ethereum is described as providing the “technical power for the digital future,” establishing itself as “digital oil” that supports a wide range of web3 applications. Unlike Bitcoin, Ethereum features Turing completeness through its programming language, Solidity, and its virtual machine, EVM, enabling the creation and management of complex smart contracts and applications.
The report also emphasized the significant role that stablecoins are playing, but I'll spare you the details. What's important to note is that statements like these will gradually erode China's negative stance on cryptocurrency, paving the way for ETFs to launch in the mainland. If the adoption of RWAs and AI wasn't enough to trigger an epic bull run, there’s also China, which will eventually open its market to a flood of new capital.
Bitcoin Sinks | Here Is What Happened And What To Do Now (Buy The Dip)
Bitcoin's value dropped from $72K to $67K, driven by various factors. David Packham, CEO of Chintai—a Singapore-based DeFi and RWA fintech company—joins me to delve into the reasons behind this market decline.
My friends from The Arch Public, Andrew Parish, and Tillman Holloway, are joining in the second part of the stream to provide an update on the $10K algorithmic portfolio.
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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.