Markets are directed by rather simple dynamics, which are in many ways aimed at influencing the emotions of market participants. If you want to see the price of tomatoes go through the roof, create a shortage. If you want to see the share price of a certain stock fall, simply restrict business operations in one way or another. This will ultimately produce weak results and earnings, which will initiate a price collapse. Markets tend to be favorable investment vehicles for those who are able to control their emotions. Simply because it is an arena of emotional manipulation. News events are designed to trigger an emotional response. Alternatively, a logical response is obtained by consuming data and conducting analysis. However, what happens when it comes to a scenario such as regulation? Proposed regulation creates uncertainty, equivalent to a surgeon’s anesthetic. When a surgeon is about to initiate reconstructive surgery, he needs to ensure that there is no movement. An anesthetic allows him to work and make adjustments, even removing parts of the body. We are currently witnessing the “surgeons” begin their reconstruction of our beloved “space”.
Governments around the world are all hot on the regulatory front at the moment. The most notable is the US with a proposed ban on algorithmic stablecoins. When you consider that we are deep into a bear market, such news gains even more power. It ultimately smothers adoption and invokes fear and uncertainty. The three main ingredients that make up the well-known term: FUD – fear, uncertainty, and doubt. This type of news paralyzes the market, ultimately making it easier to control. The uncertainty encourages many to adopt a “wait and see” approach, which ultimately removes buying support from the market. The majority of market participants within the Crypto space are speculators. In other words, they continue to dollar cost average into the coins they have identified and are simply awaiting better days. The fear of how far regulations could go is enough to put many on the bench.
This Is Exactly How The Market Will Drop
As mentioned in a recent post, the $19K to $20K level is already exhausted. The removal of additional “buying support” will ultimately trigger another leg down. Now, one can argue whether the timing of this regulatory crackdown is simply coincidental, or strategically planned. I am not going to go there. However, the reality is that it does have a strong bearing on the market. When you add to it, inflationary concerns and a market meltdown, you begin to appreciate the thesis that suggests lower lows. I do however believe that Crypto will resurface earlier than the stock market and other sectors. From my own analysis, I am picking up that it is not too far off. I think that once we experience another capitulation event based on the dynamic that I have just presented, we will be looking to bottom.
We are living through unprecedented times, and we need to remember that. We can and will try our best to navigate our way through this storm. Please do not consider the information shared in this article as investment advice. These are my own thoughts and deductions, based on my personal study and analysis of the market. Stay strong, catch you next time!
Incorrectly Interpreting Data
Leading up to the Merge, many were extremely bullish. Ethereum had just hit $2K and it had just been announced that BlackRock was about to enter the space in a very “real” way. Long-term, this is bullish. However, in the short term, it was a clear sell indicator. The majority of the market interpreted this incorrectly, and as a result, lost money. Ethereum is currently trading at $1274 at the time of writing and the entire Crypto market cap is down 5.4% in the past 24 hours. Institutions never look to pay fair market value when acquiring positions. They simply wait for discounted prices. This is how Smart Money operates.
Another Smart Money principle
You may remember that institutions began exiting their positions a couple of months ago. Many would consider this foolish, but that’s yet another clear distinction between retail investors and Smart Money. Whether it be whales or institutions, these investors and institutions generally have a good handle on risk management, unlike the average investor. Once a continued downtrend has been identified as a high likelihood they simply sell. Yes, even at a loss, and here’s the reason why. If you hodl your coins through a painful downturn, you still have the exact same amount of coins, and you have lost money.
Smart Money takes a small loss, waits for lower levels, and then simply repurchases the position. They in turn have lost less money and are now holding significantly more coins than the hodler. This move also enables them to move into profit a lot quicker than the hodler who held out all the way down. This is essentially what Smart Money is about to do. As Bitcoin begins to range lower, institutions and whales will begin accumulating again. Investors need to begin thinking and acting differently. However, as I have often mentioned, this requires knowledge and understanding, which in turn, requires time and dedication.
An Exhausted Level
The $19K to $20K level is fast becoming thinner as a level of support. The market is looking to take a further step down. What you often see is a desperate attempt from the market to try and protect a weakening level. I would suggest that we have already witnessed this to a large extent. I would also consider that a move below $18K is not too far off. If you are playing this game by exercising the disciplines that govern it, then this is actually good news for you. This is why ongoing research and analysis are so very important. I do however believe that markets are going to see the “rulebook” being adjusted over the next few years. It’s the only way how I see markets surviving. The current rulebook in a future world will be devastating, in my opinion. This however is very much my own idea and prediction of the future. I do see changes coming in how we will be interpreting and analyzing the market. A new “language” if you will.
More Than A New Lens
Many are still interpreting Crypto through the lens of the current financial and economic construct. They are unable to see beyond what they already know and understand. In other words, they are simply adding the Crypto dynamic to an existing model. Anyway, this is more appropriate for another article. I am going a bit off-topic. Ultimately, I believe that the discounts I have been waiting for are just around the corner. This is not financial advice, but rather the product of my own personal research and analysis. Get ready! I think things are about to get a little crazy!
DXY Continues To Surge
It has long been said that in times of trouble and uncertainty, investors move into gold, as a safe haven asset. This trend has been silently dying, in my opinion. The idea that gold is no longer a store of value is something that I have addressed at length in some of my earlier publications. For those who missed out, I would just like to reiterate that gold has not appreciated in dollar terms over the past 10 years. it is actually no longer able to store value over extended periods of time. In the short-term, it is often relatively stable, but can be susceptible to mild volatility. As markets have continued to bleed, investors have chosen to move into the dollar. The DXY is at a 20-year high and even though the dollar is depreciating in terms of purchasing power, other currencies are losing even more ground. Something that I have mentioned over the last year or so is that the majority of fiat currencies will ultimately collapse into the dollar. In other words, everything is falling, including the dollar. However, everything else is falling a lot faster and harder than the dollar. For immediate shelter and safety, investors are voting with their wallets, and the winner is the dollar. If you look at it from the correct perspective, it begins to make a lot of sense.
If you were an investor and you recently chose to move a significant portion of your wealth into the dollar, it would have been a great move, relatively speaking. I am a firm believer in always identifying and understanding the “relativity dynamic”. Provided, you hold dollars over the short to medium term, you are relatively safe, regardless of the loss of purchasing power. Before we continue, let’s just clarify that items don’t necessarily become more expensive, but rather the currency used to purchase them becomes weaker in its purchasing ability. If you consider that inflation is sitting at roughly 8%, it subsequently means that the dollar is losing 8% of its purchasing power over a 12-month period. Essentially, this means that if you hold dollars for two months you are going to lose roughly 3% of your “investment” or holding.
When you consider how much stocks and Crypto can plummet over a two-month period, it actually becomes a significantly attractive option. However, you do not want to be holding dollars long-term. Investors would rather sacrifice a couple of percent while they wait for this storm to pass. It’s a quick and easy flight to temporal safety. One could liken it to a flood victim finding an elevated structure away from the rushing water. A place where one can plan a way to true safety. This is all that the dollar is good for unless you are using HBD of course.
Strong Demand To Continue?
The DXY is likely to cool off but I would still anticipate a fairly strong demand to continue. In the chart below, it is quite clear how well the DXY has performed over the past few months, especially during the month of September.
As I am writing this article, the recent pump in the Crypto market has already been erased with BTC shedding more than 4% in a single hour. This is the reality of the market right now. It’s still too early to be entertaining a true reversal for stocks and Crypto. Yes, we will have numerous pumps, but they are unlikely to produce anything in terms of a reversal. As I have just mentioned in my most recent post, these volatile moves are perfect for trading, and that’s all I am prepared to do for now. However, I will continue very modest allocation via passive income models.
The strength of the DXY has simply shown us exactly where investors are willing to “park” their capital while they await calmer seas. It’s definitely not gold, which has plummeted all the way down to $1621, at the time of writing.
For gold, that’s a significant drop. The dollar has been on the front foot for some time now and I would expect continued strength until we see some “policy adjustments” from the FED. Anyway, that’s my viewpoint of what is currently unfolding in terms of the markets and the dollar. Hope you have a great weekend! Catch you next time!
Time For An Update
I have not presented any technical analysis for a week or so, due to the fact that nothing had really changed. In many ways that is still the case. There are a number of traders out there who are becoming rather bullish with October only a few days away. October is statistically a bullish month, and with all the negativity of late, I believe many are expecting a bounce. I definitely would not rule that out, but unfortunately, I believe it will be yet another “bear market pump”. The events that have been so instrumental in inflicting pain are still likely to continue. Further rate hikes, accompanied by high inflation figures definitely aren’t bullish. Even a drop to 7%, or even 6% is not really a true accomplishment. Yes, it’s better than 8% or 9%, but it’s still not nearly enough. I have gone on record stating that I believe a bottom could be hit in September, perhaps October. A lot has transpired since I initially presented my thesis. One needs to remember that these levels and timeframes were marked out months ago, even before rate hikes commenced. I only made mention of the timeframe due to people asking. However, I don’t like to rely on it too much because it can be rather unreliable due to a number of reasons. I prefer levels or zones as more reliable indicators. A level can be met while the timeframe is adjusted, making a level a far more accurate metric.
Take A Look At This
Below is a screenshot of an inverted chart of BTC. In other words, everything is flipped. Study it closely! Look at the price levels, as well as the resistance at $12K. Remember that the chart is upside down, so in real terms, the support is at $12K.
Looking at this chart, it appears that the price action is about to hit a wall at $12K. Even though some may consider a drop to $10K, it would however be extremely short-lived, in my opinion. There is tremendous support for BTC at $12K to $13K. I expect this to be respected apart from a massive swan event. Remember, I mapped out this level months ago. What seemed absurd at the time is now the most probable outcome. There is hope that the price action doesn’t necessarily reach that zone. It could retrace earlier, but I would at least consider $15K.
However, it is also important to note that the $12K level is acting very much like a magnet at this stage. Even a bounce from this level could eventually see the force of this “magnetic attraction” eventually overpower a bullish move. Even as I am writing, BTC is up 8% in the past 24 hours, which is a pretty convincing bounce. The FED does not necessarily have to “pivot”, a “pause” would also ultimately create a surge in markets. Markets are however a little ahead of the curve at this stage, so I am not placing too much hope on this bounce. It does however provide a great trading opportunity.
Markets can rally in the short-term, and Bitcoin can even reach $25K again, but ultimately, I don’t think the bottom is in just yet. I will be looking to trade the current volatility while I await convincing “bottom indicators” to be printed in the charts. As always, this is not investment advice. Enjoy the Ride! See you next time!
The “Value” Shift
I have seen @taskmaster4450 often refer to what is happening within the Crypto space as the age of abundance, or the economy of abundance. I have often referred to it as the “incentivized economy”. However you choose to view it, one thing is certain, this is where value and wealth are being created. For many years now, “data” has been seen as valuable, and desirable. The constant breakthroughs within the blockchain space are causing this idea to evolve and mature into something way more powerful. We are entering a time when many will struggle financially. However, I believe that those who chose to build and create within this space will ultimately enter into a position of abundance. Web 3 is advancing, and so are the opportunities within this niche. It’s a simple case of building for “tomorrow”. Those who have the foresight to make the most of this unprecedented opportunity are already experiencing the rewards.
No Greater Encouragement
There can be no greater encouragement when building for tomorrow than to experience immediate reward today. This literally is the case with many of the opportunities within the Crypto space. Even though many of us have our eyes set on the future, we are already enjoying immediate rewards and benefits for our time and effort. Opportunities such as Hive are literally mind-blowing when you consider the scope and potential. Hivers with conviction continue to build their stacks and accounts in the anticipation of future relevance and value. In the meantime, they are amassing immediate “value” that can be translated into any currency or alternative investment vehicle. We are so familiar with this dynamic that I think we sometimes forget how privileged we are to be “aware and active” in these formative years.
Governing Your Own Economy
In many ways, Web 3 enables users to build and create wealth without having to trust entities, banks, and other institutions that can create barriers between you and your wealth. Obviously, certain risks are also present when it comes to Web 3, but that is the case with any new and developing technology. Regulation is also a concern for many. However, there is only so far that can really go, anyway. Ultimately, individuals can create their own unique system, which they ultimately control and oversee. This is perhaps not for everyone, but people are beginning to become a lot more discerning when it comes to financial matters. The benefits of a DIY system are slowly becoming more appealing to more and more people.
Crisis Is A Great Promoter
A world in crisis ultimately acts as an effective marketing team. That which destroys trust in individuals and corporations subsequently instills trust in decentralization. The failure of the current system is ironically setting the stage for the new. I am convinced of my own personal decision. Whether it plays out as I anticipate remains to be seen. However, one thing I am sure of is my conviction. I continue to plug away day after, week after week, month after month, and year after year. So, what are your convictions, and are they strong enough to initiate action?
Laws That Govern
All markets are binary in nature and operate on multiple levels of relativity. These are inherent laws, or dynamics if you will that govern and direct markets. Most are aware of the fundamental and most basic relativity ratio that decides price. The dynamic of BUY versus SELL. If the selling pressure surpasses the support created by buyers, the price will inevitably drop, and vice versa. Strong demand will ultimately push prices higher, while weak demand will drive prices lower. This is exactly what you will see playing out during the euphoric stage of a bull market. Everyone and his uncle is buying, hence the parabolic price action. When markets shift into a bear market, participants have lost enthusiasm, they want out! Market participants shift into a state of paralysis or fear, meaning they either stop buying, or they sell. This is the gist of it. There are other “measures” that operate on relativity that will signal how strong a particular market is at any given time. Let’s take a look at one.
Understanding The Wind
When a strong wind breaks out, it reveals a lot by the destruction it leaves in its path. Structures that are destroyed, or damaged by the wind reveal weakness, or inferiority, in terms of structural integrity. However, those that remain reveal strength. They may take a pounding and be a little worse for wear, but they are still standing. One has to measure the damage against the force. When you consider that the same force destroyed certain structures, while others survived, it becomes clear that those that remain are stronger and of better quality. The same applies to Bitcoin, stocks, and any other market.
This means that even a drop in price can be bullish. Some may consider this rather counterintuitive, but it’s really not. For instance, if the FED came out with a 100 bps rate hike and Crypto only dropped 2%, it would be extremely bullish, correct? You have to measure the move against the significance of the “event” or economic climate. This is where so many have completely missed the bus during this bear market. Not only did many ignore the macro environment, they too somehow thought it had little to do with Crypto. As a result, they began making price predictions void of the most important data, at this current time.
Let’s Revisit The China Ban
Many months ago, I published an article addressing China banning Bitcoin mining. What I suggested was that if that event had not taken place, BTC would have surpassed $100K! When you consider the magnitude of the event and the price action that followed, it tells a story. At that point, the majority of Bitcoin miners were located in China. If you didn’t know, electrical costs are meager in China, at least they were then. I haven’t checked as of late. When you consider that these miners went offline and caused the hashrate to drop by 50%, it’s a big deal! Even though the BTC price tanked, it turned straight up and went on to surpass the previous high. There was no sideways movement! It was literally a u-turn!
When you consider the event’s significance and the price action that followed, you realize how bullish the market was, even at that point. Consider then if it had not taken place. That was “bullish steam” that pushed BTC from $29K to $69K. Whether you choose to recognize it or not, it was a sign of a strong market. Relatively speaking, BTC was up against a “swan event”, and managed to move higher than when the event was first triggered. When you analyze price action, you need to factor in the many different dynamics that are at play. Understanding and studying the “relativity aspect” can help you discern the true state of any market. Anyway, that’s me for this Sunday. Have a great week!
Crypto Twitter Is A Joke
Apart from a handful of accounts, CT is an absolute joke. I could never spend endless hours perusing the content that is consumed and published on CT. For the most part, it’s just a continuous flow of single isolated indicators suggesting that BTC is about to moon. When you consider how wealthy some of these guys are, you realize exactly how they make their money. It’s definitely not by being accurate. As I mentioned there are a few solid guys putting out quality content in the form of data and analysis. However, unless you know who they are, you are going to have to navigate your way through a lot of worthless garbage. No matter the platform you choose to use, this will always be an issue, decentralized, or not. However, it has become more and more difficult to find useful and quality content on Crypto Twitter.
What If There Was A Better Alternative?
The introduction of threads is a good start in creating a “Twitter alternative”. Obviously, many still choose to utilize Twitter as a way to gain external eyes on Hive. There is nothing wrong with that, provided you have a fairly sizable following. As I have mentioned before, I don’t have the confidence to “rebuild” on Twitter after losing my initial account that I created in 2008. It took me years to build a following of 11K followers, and it was erased in a moment, for no real reason. I truly am one of the few that can appreciate a Web 3 alternative. I have experienced the downside of centralized entities. In many cases, they are simply a power unto themselves. They do as they please and are not answerable to anyone.
Threads will continue to improve and eventually provide a viable alternative in my opinion. Have you noticed that much of the content on Leofinance is of a fairly high caliber, unlike Twitter? Many of us have multiple years in this game and have a lot to share that can enrich newcomers. That is essentially how you need to view Leofinance, in my opinion. It’s not just a blogging platform with DeFi protocols. It’s a resource, a point of reference, a place you can go to gain knowledge and information. I see Leofinance becoming an absolute authority in the Crypto space. The birth of LeoGlossary amplifies what I am suggesting… a resource, a point of reference.
Good Things Take Time
As a community, continued dedication and patience are required. This is not simply going to unfold overnight. Every post, every comment, and every share outside of the ecosystem continues to add and create value on the Hive blockchain. As the bear continues to drag its prey through the icy woods, we simply keep going and keep building. This is what bear markets are about, slowly garnering strength, to be later unleashed on an unsuspecting market.
The Push Continues
There has been a lot of talk regarding the proposed banning of algo-based stablecoins in the US. This may come as a surprise to some, but for the majority of us, we have been expecting this, and more! This is the only path that governments are willing to walk with regulators. As mentioned in a recent post, overbearing regulation and taxation will inevitably have a significant impact on certain jurisdictions. Countries that choose to push beyond what is necessary, and even considered “acceptable”, will ultimately lose citizens to more friendly and accommodating locations. The wind driving this regulatory crackdown appears to be intensifying. At some point, this “storm” could transform into a truly destructive hurricane. Ever since regulators and the SEC stepped up to the plate, we have experienced an ever-tightening grip. The desire for control is uncanny. Isn’t it funny how nobody seemed to care about “naive investors” a few years ago? Only once the industry had reached a significant market cap did the “need for regulation” suddenly arise.
You Can Always Bank It
When it comes to power, you can always bank on two very prominent forces: Money and control! It goes without saying that this path will be exhausted and pushed as far as possible. As our world and economies adjust to a new age, many are earning their income in the form of Crypto. Some may not necessarily work within the space, but certain payments are being received in the form of Crypto. As we have so often discussed, Crypto and Web 3 offer an unparalleled opportunity to earn income and generate wealth. I know of many who left “traditional employment” during covid and have never looked back. Are these people simply going to sit back and allow what they have built simply be restricted and limited without reason?
At The Top Of The Chain
When it comes to human survival, income sits at the very top of the hierarchical structure. That means that if someone needs to move in order to maintain their income, they will! Globalists would love one set of rules and standards for the world. However, that is not reality, at least not yet. There are numerous countries that will welcome Cryptoneurs and those earning Crypto. As this regulatory push continues, another push will commence, a push for freedom. There is only so much a person is willing to take before they take action. Your income is your life. Those who interpret what I am suggesting as extreme, most likely earn a salary working 9 to 5. You can’t appreciate what I am saying unless your life is reliant upon Crypto income, and the walls are closing in on you.
Take A Look At The Crypto Kingpins
Have you considered where CZ and Sam Bankman-Fried live? They are leading by example in this area as well. Choosing to avoid unnecessary issues, they have chosen Crypto friendly locations. There are other benefits as well, such as low or zero taxation and the ease of doing business. The more limiting regulations become, the more citizens will shift to alleviate that discomfort and restriction. Regulation will continue, there is no doubt about it! How are you positioned to face this storm?
No Stability To Be Found
Financial markets and economies are in a state of chaos, despite the reassurances being offered by certain politicians and the like. I understand that the primary objective is not to cause alarm and panic. However, how can citizens prepare themselves if they are led to believe that everything will simply be ironed out over time? Sometimes you need a bit of a shock, in order to realize the magnitude of a situation. Inflation remains aggressively high, while interest rates continue to rise. This does very little to paint a picture of serenity and stability. The reality, however, is that the wind has been completely taken out of the market’s sails. Sure, we will continue to see the occasional pump, but it still appears to be way too early to expect a reversal. To be honest, I don’t see much of a reversal, once markets bottom.
An Eventual Bottom
I expect somewhat subdued market conditions once markets realize and solidify a bottom. The only real reason markets rallied so hard post covid, was QE. Not only are we void of QE this time around, but we also have the exact opposite taking place in the form of QT. This is extremely damaging for the stock market, as well as Crypto, considering that it is being classed as a risk-on asset. I do however believe that Bitcoin would benefit from some sort of banking crisis post-2022. Were this to take place, I believe that it would be a catalyst, ultimately encouraging the long-awaited decoupling from the stock market. We also have the halving scheduled for 2024, which is yet another bullish catalyst. Depending on the strength of negative sentiment at the time, BTC could begin to break away. This would simultaneously signal a maturing of the Crypto space, an asset class coming into its own if you will.
A Process Requiring Time
Regardless of what transpires over the coming months, the market is trapped in a scenario that will require time to escape. Even in the case of Bitcoin, this is now very much a process. Events have escalated way too far to simply bounce back and continue the show. On top of that, the FED will continue to execute its plan, ultimately rendering markets weak and fragile. This is where those who are actually earning Crypto have a fighting chance. The general Crypto strategy of “loading up your bags” and waiting is not really going to be effective in these market conditions. Especially, since many already loaded up months ago and are currently underwater. The typical speculative play is off the board for now. However, if you have a rather long-time horizon, you may still find it attractive.
It’s Time To Earn
For fear of sounding like a broken record, this is where those who have developed income models have an edge, especially, passive income models. There are numerous other ways to generate Crypto income, including opportunities such as Hive, affiliate programs, and multiple earning opportunities within the Crypto space. Alternatively, many traditional online income sources can also be utilized to earn, and subsequently, purchase Crypto. Relying on price appreciation alone, as a speculator, could prove to be somewhat disappointing. Trading falls into the “earning” bracket, as one can open and close positions as markets continue being volatile within a rather predefined range.
Once again, we are experiencing the harshness of a Crypto winter, as regulators crack down on stablecoins. This is primarily in regard to algo-based stablecoins. From what I understand, backed stablecoins, such as USDC, and even BUSD are not being targeted. However, I am sure both entities will have to disclose exactly how their stablecoins are backed. It’s definitely a challenging time on all fronts. In the meantime, keep earning, and keep growing, no matter how challenging it may be! See you next time!
Generally A Good Indicator
Bitcoin dominance is often utilized, especially by traders looking to discern the next altcoin season or rally. It has been a fairly good indicator over the years and still holds incredible importance when it comes to navigating the altcoin market. If you are one of my more regular readers, you will be aware of my “rule” when it comes to indicators: Never use a single indicator in isolation. I am a firm believer in finding confluence. In other words, finding multiple indicators that are pointing in the same direction. Confluence decides direction, just as volume moves and sustains market moves. Below is the current chart for the Bitcoin dominance, which reveals that the dominance for BTC has been ranging between 39% and 47% for the past seven months or so.
There have been three prominent attempts of a reversal, which have all subsequently failed. These events are the multiple bear market rallies we have experienced since BTC found a local bottom at $17.600. The dominance does not necessarily rise alongside price, but it oftentimes does. The Bitcoin dominance is currently experiencing a bounce off of support and is attempting to give it another shot. However, all is not quite as it seems. A quick visit to CoinMarketCap will reveal that there are currently more than 21K altcoins in circulation. This number has grown quite significantly in the past year or two, which leads me to the following Deduction.
Not A True Reflection
That’s right, I think that in real terms, Bitcoin dominance is a lot stronger than the “official” number indicates. The market is being flooded with junk coins that appreciate and then fall to zero. However, as fast as they die, new ones arrive. This creates a false representation of altcoin strength. A percentage of the strength seen in the altcoin dominance is actually non-existent. It’s merely a mirage created by a constant flow of junk coins that have no real utility or value. Eventually, the market identifies them, but until that point, they are overinflating the altcoin dominance. This ultimately supports my approach of achieving as much confluence as possible. Relying on a single indicator is rather risky. After all, there could be multiple factors at play that are rendering a somewhat skewed presentation of data.
On the other hand, the more indicators you make use of, the better chance you have of gaining a more accurate interpretation. As I just mentioned, a single indicator could always be manipulated in one way or another. However, with multiple indicators and data, we are able to comprise a more comprehensive thesis. Next time you make use of Bitcoin dominance, perhaps consider that finding additional confluence will help solidify and validate your thesis.