Summing Up The Week
The market continues to defy expectations with the S&P 500 making new highs in spite of negative commentary from Treasury Secretary Janet Yellen, a Federal Reserve preparing to taper, and historic inflation numbers.
Let’s look at the news that moved the markets this week…
Secretary Yellen spooks markets
On Sunday, Treasury Secretary Janet Yellen told Bloomberg News that raising the interest rate would be positive for the country, reported CNBC.
“The prospect of higher interest rates spooked the markets,” Jim Cramer said on Mad Money reacting to the mixed session on Wall Street. “It caused sellers to [do] what’s known as ‘hit bids’ all over the place,” Cramer said in reference to when traders sell a stock below a buyer’s bid price.
While initially Yellen’s comments might be considered bearish, Cramer sees them as the opposite, “I think it’s a fabulous buying opportunity.”
9.3M job openings… the U.S. is now hiring!
On Tuesday, the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) showed 9.3 million job openings in April versus 8.18 million expected, reported CNBC.
Why do we have so much unemployment with so many available jobs?
The answer is pretty simple – the extended enhanced unemployment benefits don’t expire until September, leaving many Americans to choose not to work as, in some cases, they can make more money from unemployment than they would get paid at their job.
Once the enhanced unemployment benefits expire, many economists believe we’ll see significant drops in ongoing jobless claims as America returns to work.
The Fed is preparing to prepare to taper…
On Tuesday, CNBC covered comments from the Federal Reserve Bank which have led experts to believe the Fed is in the early stages of preparing the markets for it to reduice its $120 billion monthly asset purchase schedule.
“As the economy continues to improve, and we see it in the date, and we get closer to our goals… we’re going to have discussion about our stance of policy overall, including our asset purchase programs and including our interest rates,” said Cleveland Fed President Loretta Mester in an interview on Friday.
According to CNBC, a discussion would take place far in advance of an actual tapering of asset purchases, which would come some months later in an effort to avoid a negative reaction in the markets.
“It will become important for the FOMC to begin discussing our plans to adjust the pace of asset purchases at future meetings,” said Fed Vice Chair for bank supervision Randal Qarles last month. “In contrast, the time for discussing a change in the federal funds rate remains far in the future.”
Consumer prices jump highest pace since summer 2008
On Thursday, the Consumer Price Index (CPI) showed a jump in prices of 5% in May, the fastest pace since the summer of 2008, reported CNBC.
The CPI represents a selection of consumer product prices including food, energy, groceries, housing, and sales across a wide variety of different household goods, and it rose 5% from a year earlier versus economist expectations of a 4.7% gain.
The most significant price jump was in the used car and truck market, where prices rose 7.3% for the month a cumulative 29.7% over the past year.
The Federal Reserve continues to be dismissive of these figures, believing any current inflation is simply transitory and temporary, and that prices will return to normal levels once the global economy fully reopens.
Next Week’s Gameplan
It’s hard to bet against the Fed as they seem to be doing everything they can to ensure the market’s going nowhere but up. I’ve been adjusting my buy levels accordingly to add to my positions.
However, as always, I’m keeping significant cash on the sidelines in case some of the more bearish analysts are actually right and we see a significant correction from here.
Get Irked contributors are not professional advisers. Discussions of positions should not be taken as recommendations to buy or sell. All investments carry risk and all readers must accept their own risks. Get Irked recommends anyone interested in investing or trading any asset class consult with a professional investment adviser to determine if an investment idea is suitable to them and their investment goals.
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Bitcoin Price (in USD)
Bitcoin Price Action
Rumors of the Bears’ deaths were exaggerated…
The Bears continue to rule the roost in Bitcoin, causing the crypto to collapse over the past week and defusing the Bull argument that the worst was over for the space.
Plus, earlier in the week, the FBI announced they were able to seize the majority of the ransom of Colonial Pipeline by a Russian cyberattack group (more details available from this CNBC article).
The Bullish Case
While both Bulls and Bears point to the FBI seizing the ransom as a negative sign for Bitcoin, I wholeheartedly disagree. By demonstrating that law enforcement can still catch criminals even if they use Bitcoin, it lessens the chances for governments globally to ban Bitcoin outright.
In fact, I’d argue that it’s easier to catch criminals who use the blockchain for ransom as the addresses and transactions are public record, even if anonymous. Since the ransom-payer would need the ransomer’s wallet ID in order to send the ransom, law enforcement can start tracking that wallet and see where the funds go.
If the funds ever enter into a regulated exchange like Coinbase, Gemini, or Kraken, those exchanges are legally-required to report the account-holder’s information to law enforcement.
However, despite my perception of the events, Bitcoin and the entire cryptocurrency market certainly saw extreme weakness this week.
The Bearish Case
Bears are pointing to the reducing momentum of Bitcoin as a bearish sign similar to what happened throughout the course of 2018. In 2018, the $6,000 level marked support with Bitcoin making lower highs each time it tested the $6,000 level until, in November, Bitcoin crashed -50% to make a new low at $3128.
Bitcoin seems to be doing the same here with $30,000 providing support. If it sees a similar drop, a $15,000 price target is very much in the cards.
Current Allocation: 3.621% (+0.053% since last week)
Current Per-Coin Price: $36,207.22 (-5.149% since last week)
Current Profit/Loss Status: +2.625% (+5.357% since last week)
Buying in Stages…
During Bitcoin’s selloff up until Wednesday, my buy orders filled at $35,636.59; $34,955.14; $34,234.75; $32,268.28; and $31,839.94. Cumulatively, the orders lowered my per-share cost -4.493% from $38,172.89 to $36,457.91 and increased my allocation +1.786% from 3.568% to 5.354%.
On Wednesday and Thursday, Bitcoin shot through my new per-share cost where I took some of my allocation off the table with orders that filled at $36,594.63, $37,058.93 and $38,088.29. The orders reduced my per-share cost by -0.688% from $36,457.91 to $36,207.22 and reduced my allocation -1.733% from 5.354% to 3.621%.
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:
1.811% @ $31,347
2.716% @ $28,257
3.621% @ $25,584
4.526% @ $21,560
5.432% @ $19,087
6.337% @ $15,959
7.242% @ 11,117
8.148% @ $8,567
9.091% @ $5,977
9.193% @ $4,939
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.
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Studies show that economic recessions cause an increase in suicide, especially when combined with thoughts of loneliness and anxiety.
If you or someone you know are having thoughts of suicide or self-harm, please contact the National Suicide Prevention Lifeline by visiting www.suicidepreventionlifeline.org or calling 1-800-273-TALK.
The hotline is open 24 hours a day, 7 days a week.