This report covers:
The latest ETF news and what it means for the future of crypto
Is the rally overextended? (what my technical analysis says)
Summary:
I took profit on my long trade because we turbo mooned too far, too fast and I’m skeptical of the reasons for the pump
I’m shifting my strategy from timing market cycles and swing trading to dollar cost averaging and hodl-ing. I don’t think there will be wild bull or bear cycles like in the past.
I’m long-term bullish on Bitcoin but I can’t find enough reasons to be bullish in the short to medium-term after a massive, narrative-driven pump
Read time: 6 minutes
Current BTC price: $43,695
What’s Moving the Markets? ETF News & Pumpamentals
It feels like yesterday that the legacy news was trying too convince everyone that crypto was dead after FTX collapsed. Bitcoin has rallied 180% since then lol.
Bitcoin is the ultimate contrarian asset. It never seems to die, no matter how dead it seems, and the perfect time to buy is when everyone thinks it's dead.
More recently, Bitcoin has gone up for eight straight weeks including a monster rally this week. The pump has been largely driven by the spot ETF narrative.
Bulls are betting that the BlackRock ETF will bring in massive amounts of money because BlackRock is more credible than the managers of other products
Bears are betting that the ETF approval is priced in, might not bring in as much capital as expected, and/or could be a “buy the rumor, sell the news event”
Permabulls’ expectations for inflows seems high given that there are already 8 spot ETF's approved worldwide with a total of only ~$4B in assets.
I think it will take a long time to get back to prior all time highs. Prior all time highs happened under some wild circumstances:
The GBTC premium carry trade required Grayscale to buy billions of dollars worth of Bitcoin
Reckless lending practices by crypto banks (e.g. Celsius and BlockFi) incentivized funds like 3AC to borrow on margin and pile even more money into the GBTC premium carry trade
But again, the bullish counter-argument is that no-one cares about any of that and the reason people haven’t been buying is because of a lack of a spot ETF in the US.
Bitcoin’s New Era
A lot of the crypto OGs have left voluntarily (e.g. Binance founder, CZ), gotten arrested (e.g. SBF), or lost everything (e.g. 3AC). TradFi is now taking over, starting with the BlackRock spot ETF. People don’t trust crypto native products and services and nor should they.
The crypto industry is changing hands from missionaries to mercenaries.
Missionaries create value, mercenaries extract value
Missionaries are motivated by the mission (money that can’t be printed by a centralized group), mercenaries are motivated by profit
Missionaries experiment and build, mercenaries conserve and protect
According to Jeff Bezos, missionaries make more money than mercenaries. The era of 10x gains in months is over IMO.
Crypto slipped a few market cycles past the mercenary-goalie, but now they’ve sunk their claws in to take their shake.
My favorite mental model for predicting the future is “follow the money”—whatever will make powerful corporations (specifically the massive financial services and healthcare companies) the most money is what will happen. This mental model not always true but it’s a useful tool to help predict some things.
BlackRock will make more money from its Bitcoin spot ETF it Bitcoin consistently goes up like the stock market. Bitcoin has been too volatile for normies and that’s restricting BlackRock’s ability to earn fees from its Bitcoin ETF and any other products and services it might launch in the future.
This new era is probably long-term bullish for crypto, but I’m more of a missionary than a mercenary myself so I’m just less interested in crypto now. There are still gains to be eked out but not like in the OG era.
I don't even know what crypto is anymore. The community used to stand for sovereignty and freedom from a broken financial system. Now the community's biggest bullish narrative is that BlackRock is coming to rescue the industry. ETF investors will not own their own private keys.
My Outlook Based On Technical Analysis
I bought Bitcoin at $35K. I had been saying for several months that I was planning to do that. The trade has been working out great.
However, I also said that while I’d love to be able to stay in this position for several years, if it turbo moons too fast I'll take profits early. Well, it turbo mooned, so I took profits early.
I’m happy to have locked in gains. It was another winning trade that I shared publicly, and in this case months before I even entered it. I also shared more aggressive entry signals at $28K and $32K.
Let’s take a look at the charts now, starting from the long-term (monthly) and moving to the short-term (daily).
Long-term outlook
Overall, the monthly chart looks bullish because it’s in an uptrend. BTC made a low in December, a high in June, a higher-low in August, and a higher-high in October.
However, the bearish counterargument against buying now is that it’s essentially in no-man’s land right now. The risk vs reward is not great. And I don’t think the probability is great either because of the reasons I discussed above.
As a long-term investor, the trend of the monthly chart is the most important signal to me and because it’s in an uptrend I’d be comfortable dollar cost averaging and holding here.
Medium-term outlook
I could make the case that ~$45K is an area of resistance on the weekly chart. But that price action is from a long-time ago and I think this market is trading more based on narratives and pumpamentals right now and the number one rule of crypto is don’t fight the pump even if the reason for the pump is dumb. So I’m definitely not shorting.
Short-term outlook
The daily chart gave a strong bullish signal on December 1st when it broke out.
Now, it’s not saying much. If you want to be bullish, you don’t want BTC to retrace the breakout. If there’s truly a lot of demand in this market, it will keep going up or at least only trade sideways rather than down.
There are no trades on the table for me right now though. I bought at $16.5K publicly after FTX collapsed, then Bitcoin went up 85% to $30K, and I sold publicly after BlackRock announced it had applied for a spot ETF. Bitcoin then pulled back 20%. It’s been a good year for me and I don’t feel the need to do anything more for now.
More news and alpha
US interest payments on federal debt is now close to $1 trillion and recently surpassed the budget for war
Moody’s downgraded the credit outlook for the United States to “negative” because of economic weakness, huge deficits, and rising financing costs.
JP Morgan CEO, Jamie Dimon said that if he was the government, he would “close down” crypto because it can be used for illegal activity. JP Morgan has paid $38 billion in fines for illegal activity.
The FTX estate was approved to sell $744M in assets, mostly GBTC, ETHE, and BITW.
Digital Currency Group (DCG), the owners of Grayscale (manager of GBTC), is likely fraudulent.
Goldman Sachs says AI adoption could put upward pressure on interest rates.