Summing Up The Week

Despite reports of inflation and heightened tension in the Middle East, all eyes were on Bitcoin this week after it plummeted more than 20% in less than a half hour on Wednesday.

Let’s look at the news that moved the markets this week…

Market News

Israel-Palestine tensions heighten, cease-fire reached

Ongoing fighting between Israel and Palestine continued when Israeli airstrikes killed 33 Palestinians, including 13 children, early Sunday morning, reported CNBC. Fighting erupted a week ago this past Monday with no sign of an end to the outbreak.

While a world away, fighting and instability in the Middle East can often negatively impact the global markets as both countries hold nuclear weaponry, and, while the likelihood of nuclear use may be low, the concern remains very real.

On Thursday, both countries agreed to a cease-fire over the Gaza conflict, reported CNBC. “I believe the Palestinians and Israelis equally deserve to live safely and securely and are to enjoy equal measures of freedom, prosperity, and democracy,” said President Biden during a press conference. “My administration will continue our quiet relentless diplomacy toward that end; I believe we have a genuine opportunity to make progress and I’m committed to working for it.”

Inflation: Homebuilder report rising costs

Rising costs of construction materials are weighing on housing affordability, reported CNBC on Monday. Builder sentiment in single-family housing remained unchanged at 83 in May signifying positive sentiment as anything above 50 is considered positive.

However, with the steady steam of buyers, costs are rising. “Some builders are slowing sales to manage their own supply changes, which means growing affordability challenges for a market in critical need of more inventory,” said Robert Dietz, National Association of Home Builders’ Chief Economist. “Homebuyers should expect rising prices throughout 2021 as the cost of materials, land and labor continue to rise.”

Bitcoin and Cryptocurrencies Plunge 30-50%+

Bitcoin dropped more than 30% in less than a day on Wednesday, reported CNBC. I don’t normally cover crypto in the main part of the Week in Review, reserving price moves for the Crypto Corner, but when Bitcoin makes the front page of CNBC, it’s time for some coverage.

On Coinbase, Bitcoin tagged $30,000.00 to the penny. Analysts and pundits alike tried to come up with explanations for the move, with some JP Morgan analysts saying investors are moving out of Bitcoin and back into gold. Personally, I’ve seen volatility like this before and believed we’d see it again in Bitcoin.

Some believe Bitcoin may be nearing a bottom, but I wouldn’t be so sure. Historically, Bitcoin goes through incredible bull and terrifying bear markets, with the moves of each subsequent cycle dwarfing the one that came before.

Given that the selloff in 2018 saw Bitcoin lose more than -82% from its high, a price target of $11,681.41 before Bitcoin bottoms this time is incredibly feasible.

On Friday, the news got worse for crypto as China called for a crackdown on bitcoin mining and trading behavior, reported CNBC. The statement said it is necessary to “crack down on Bitcoin mining and trading behavior, and resolutely prevent the transmission of individual risks to the social field.” On Friday, Bitcoin once again lost support at $40,000 and dipped into the $30K area.

Fed hints at tapering asset purchases

In April meeting minutes, Federal Reserve Bank officials said “it might be appropriate at some point” to consider tapering asset purchases if the economy shows “rapid progress,” reported CNBC on Wednesday.

Fed Chairman Jerome Powell did say that the economy would need “substantial further progress” toward the standard the committee had set before any consideration would be given to easing the Fed’s current easy money policies.

Stocks briefly added to losses following the releasee with government bond yields remaining mostly higher throughout Wednesday’s trading.

Jobless claims drop to new pandemic low

It’s funny how we get used to horrible news and find a way to make it sound good. On Thursday, the Labor Department reported 444,000 new jobless claims in the past weeks, beating the Dow Jones estimate for 452,000 and representing the lowest reported figure since the pandemic started, reported CNBC.

While that figure was… good (?)… the continuing claims number continued to move higher, rising to 3.75 million, an increase of 111,000, showing that the true state of the economy is still far from improving at a decent clip for many Americans.

Next Week’s Gameplan

While it was a rocky week for the cryptocurrency space, the markets remained relatively flat going into the end of the week. However, many analysts believe there are rocky times ahead with more than one suggesting corrections of 10-20% in the very near future. 

This Week in Play

Stay tuned for this week’s episodes of my two portfolios Investments in Play and Speculation in Play coming online later this weekend! 

Crytpo Corner

Bitcoin Price Action

Bitcoin breakdown…

As you may have read in the Week in Review, Bitcoin and the rest of the crypto market completely pooped the bed this week, seeing an epic one-day crash on Wednesday following selling pressure since last weekend. Bitcoin found support at $30,000, -53.77% off its all-time high of $64,896.75.

However, despite the ferocity of Wednesday’s crash, Bitcoin has moved like this before in its short life, and it’s likely not done headed down (read my Week in Review story above for more on my outlook).

The Bullish Case

Bulls believe this sudden drawdown finally marks the last gasp of extreme volatility in the space. With weak hands shaken out, Bulls believe price targets of $100,000 and higher are back on the table.

The Bearish Case

Bears believe there’s more downside in store and that Wednesday was just the beginning of a new Crypto Winter in the sector. While I typically don’t side with the bulls or bears, I simply plan for both directions, I believe the risk is to the downside based on past patterns. Potential price targets in the low $20Ks are very likely with support around $11-15K also possible seeing as how Bitcoin sold off -82% from its highs in 2018, and nearly halved its initial $6,000 support when it broke down later in the year. As a more extreme prediction, some analysts believe that given how powerful this bull market cycle was, a $10K break with a bottom around 2018’s and 2020’s $3-4K could have potential, too.

Bitcoin Gameplan

Current Allocation: 4.321% (+2.151% since last week)
Current Per-Coin Price: $40,000.92 (-19.660% since last week)
Current Profit/Loss Status: -7.038% (-9.081% since last week)

Buying in Stages

Despite my bearish short-term outlook on Bitcoin and the rest of the cryptocurrency space, I stuck to my discipline which means trading my plan and Buying in Stages.

Over the week, I made buys all the way down with orders filling at $46,838; $44,586; $43,308; $41,088; $39,926; $36,928; $34,468; $32,489 and $30,269.36.

Cumulatively, the orders served to lower my per-share cost -18.966% from $49,789.29 to $40,346.05. My allocation increased +5.863% to 8.033% from 2.170% last week. Once again, to clarify what that allocation figure means, my portfolio is still nearly 92% in cash.

Bitcoin bounced significantly on Thursday clearing my per-coin price, so I used stop-loss limit orders to take small profits and, more importantly, reduce my allocation size with orders that filled at $40,282.70; $41,052.99 and $41,353.71. The sales lowered my per-share cost -0.855% from $40,346.05 to $40,000.92 and reduced my allocation by -3.712% from 8.033% to 4.321% as I anticipate Bitcoin to test its lows.

Yes, I believe Bitcoin may have further to go before it’s done…

Bitcoin Buying Targets

Using Moving Averages and supporting trend-lines as guides, here is my plan for my next ten (10) buying quantities and prices:

0.480% @ $34,423
0.240% @ $31,684
0.240% @ $30,029
0.480% @ $28,835
0.490% @ $27,271
1.599% @ $24,980
2.346% @ 22,527
3.334% @ $20,106
0.900% @ $18,237
3.637% @ $16,290

No price target is unrealistic in the cryptocurrency space – Bullish or Bearish.

While traditional stock market investors and traders may think the price targets in the cryptocurrency space are outlandish due to the incredible spread (sometimes a drop of near -90% or a gain of up to +1000% or more), Bitcoin has demonstrated that, more than any speculative asset, its price is capable of doing anything.

Here are some of Bitcoin’s price movements over the past couple of years:

• In 2017, Bitcoin rose +2,707% from its January low of $734.64 to make an all-time high of $19,891.99 in December.
• Then, Bitcoin crashed nearly -85% from its high to a December 2018 low of $3128.89.
  In the first half of 2019, Bitcoin rallied +343% to $13,868.44.
• From June 2019, Bitcoin crashed -54% to a low of $6430.00 in December 2019.
• From December 2019’s low, Bitcoin rallied +64% to $10,522.51 in February 2020.
• In March 2020, Bitcoin crashed nearly -63% to a low of $3858.00, mostly in 24 hours.
• Then, Bitcoin rallied +988% to a new all-time high of $41,986.37 in January 2021.
• Later in January, Bitcoin dropped -32% to a low of $28,732.00.
• In February 2021, Bitcoin rallied +103% to a new all-time high of $58,367.00.
• Later in February, Bitcoin dropped -26% to a low of $43,016.00.
• In March 2021, Bitcoin rallied +44% to a new all-time high of $61,788.45.
• Later in March, Bitcoin dropped -19% to a low of $50,305.00.
• In April 2021, Bitcoin rallied +29% to a new all-time high of $64,896.75.
• In May, Bitcoin crashed -54% to a low of $30,000.00.

Where will Bitcoin go from here? Truly, anything is possible…

What if Bitcoin’s headed to zero?

The only reason I speculate in the cryptocurrency space is I truly believe Bitcoin isn’t headed to zero.

I am prepared for that possibility, however, by knowing I could potentially lose all of the capital I’ve allocated to this speculative investment. Professional advisers recommend speculating with no more than 5% of an investor’s overall assets. Personally, I’ve allocated less than that to speculating in crypto.

I feel that anyone who doesn’t fully believe in the long-term viability of cryptocurrency would be better served not speculating in the space.

On a good day, this asset class isn’t suitable for those with weak stomachs. On volatile days, the sector can induce nausea in the most iron-willed speculator. If a speculator isn’t confident in the space, the moves will cause mistakes to be made.

DISCLAIMER: Anyone considering speculating in the crypto sector should only do so with funds they are prepared to lose completely. All interested individuals should consult a professional financial adviser to see if speculation is right for them. No Get Irked contributor is a financial professional of any kind.