Summing Up The Week
After peaking last week, the markets pulled back a little this week following undeniably bad inflation data as supply-chain woes continue to weigh on the global economy.
Let’s take a look at the news that moved the markets this week…
Wholesale prices rose +8.6% year-over-year in October
On Tuesday, the Labor Department reported that wholesale prices rose 8.6% from a year earlier, the highest annual pace in records going back 11 years, reported CNBC.
The Producer Price Index (PPI) indicates the final demand prices from producers of goods which rose 0.6% for the month, in line with Dow Jones estimates. At its most basic level, the regular increase of the PPI at these historically-high levels indicates inflation with economists at Goldamn Sachs noting the “inflation overshoot will likely get worse before it gets better.”
Consumer prices jump 6.2%, biggest in 30 years
On Wednesday, the Labor Department reported that the Consumer Price Index (CPI) lept +6.2% from a year ago in October, the biggest gain since December 1990, reported CNBC.
Inflation hit a broad range of products and was much worse than the 5.9% pop expected by Dow Jones economists in October. The basket includes everything from gasoline to healthcare as well as groceries and rent.
“Inflation is clearly getting worse before it gets better, while the significant rise in shelter prices is adding to concerning evidence of a broadening in inflation pressures,” said Seema Shah, Chief Strategist at Principal Global Investors.
The increasing rates of inflation left many traders concerned that the Federal Reserve could be forced to tighten much faster than they had signaled during last week’s minutes.
Consumer Sentiment hits 10-year lowOn Friday, the University of Michigan reported that its Consumer Sentiment Index dropped to 66.8 in November, the lowest reading in 10 years, reported CNBC. Additionally, a separate report from the Labor Department showed 4.43 million Americans quit their jobs as what journalists have started calling “The Great Resignation.” As for sentiment, economists believe the supply-chain and inflation concerns are weighing down the indicator. “Consumer sentiment fell in early November to its lowest level in a decade due to an escalating inflation rate and the growing belief among consumers that no effective policies have yet been developed to reduce the damage from surging inflation,” said Richard Curtin, the survey’s chief economist. Despite what was an indisputably negative figure, the markets shrugged off these particular news items on Friday, deciding to head higher, instead.
Next Week’s Gameplan
The inflation story continues to be a fascinating one with some companies able to weather the storm with nary a problem and others suffering immensely under the weight of consumer and supply-chain concerns.
At the risk of becoming a repeating record (or perhaps, more appropriately, an endlessly looping audio file) this means looking for stock-specific opportunities to add to positions and take profits. If you take a look at this week’s Investments in Play and Speculation in Play, you’ll see me doing just that in both portfolios.
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
And… another all-time high for Bitcoin!
Bitcoin hit two new all-time highs this week, first on Monday and then again on Tuesday with its new high set suspiciously on-the-dot at $69,000.00. The crypto also found support higher than it did the week prior, setting a new weekly low at $60,125.00 on Saturday.
The Bullish Case
After making another new all-time high, the Bulls are feeling assured that a six-digit Bitcoin price is somewhere in the cards in the next two months before year-end. Many believe that we won’t see the crypto dip below $50K again with some going as far as predicting a $250,000 price target and $60,000 holding as a new low.
The Bearish Case
Bears continue to lack credibility with many claiming the new $69,000 all-time high made this week as some sort of misguided fluke. While most Bears still believe Bitcoin will pull back to $20K (which, honestly, I truly hope it will as that would be an amazing buying opportunity), there are no Bear analysts who I have any faith in at the moment given their failings up to this point.
Bitcoin Trade Update
There’s no such thing as a free lunch – say no to Robinhood…
As you may already know, I switched to Robinhood a few weeks ago after they announced they would be introducing crypto wallets which would allow traders to pull their coins off the platform. That, combined with their “zero commissions,” made Robinhood the logical choice so I switched from Gemini.
As they say, there’s no such thing as a free lunch.
The way Robinhood makes money from its “free” crypto-trading is a multi-pronged attack:
Robinhood uses its own crypto pricing. In other words, it lies. Okay, let’s just say it fudges the truth. Instead of using agreed-upon crypto pricing, Robinhood uses its own book which permits it to manipulate prices in its favor.
Robinhood’s actual “fee” is 0.3%+ thanks to wide bid-ask spreads. The bid is the maximum price a buyer wants to buy an asset for. The ask price is the minimum price a seller wants to sell the asset for. The spread is the difference between those two prices. In a “perfect” world, the spread would be as small as possible, and over on Gemini and Coinbase, the spread is usually very tiny, less than 0.01%.
On Robinhood the difference is 0.3%. That means you’re essentially paying a 0.3% fee because if you buy a crypto and change your mind, you can’t sell it immediately into the market without taking a 0.3% charge. Sure, you didn’t pay any commissions when you bought the crypto, but Robinhood is pocketing the difference of the spread – buying the crypto at the lower price and selling it to you at a higher price.
Robinhood waits to fill limit orders. If your limit order has been on the books for awhile, you should be near the top of getting filled. So, when a price goes through your limit order, you should be filled in microseconds – maybe a full second at most. I witnessed first-hand my limit orders not being filled after the price didn’t just break through my order but stay beyond my limit for minutes at a time.
Essentially, it appears as though Robinhood is manipulating its order book to ensure it makes as much as profit by ignoring limit orders until the price has moved past the limit by such a large amount that Robinhood can pocket the difference as profit.
You get what you pay for – back to Gemini…
Even though Gemini has a 0.25% fee for limit orders and a 0.35% fee for market orders, my orders get filled when they should. Plus, Gemini makes its pricing book available as an API to sites like TradingView so you can accurately track the prices and know your orders will go through when and where they should.
You get what you pay for. Quality trading services aren’t free and I should have known this. Gemini has fees but you’re paying with good reason. I have now switched back from Robinhood and will never be using Robinhood’s services again.
Trade Closed: +10.770% Gain
When Bitcoin made its new high of $68,568.85 on Tuesday morning, I decided this would be a good time for me to close my trade and switch back to the Gemini platform. I had been taking profits ever since Bitcoin crossed $66K earlier in the week, so the combined sell orders gave me an average selling price of $67,665.36.
Overall, my buying price was $61,086.30, my selling price was $67,665.36, and this gives me a profit of +10.770% on a 3-week trade. Not too shabby considering the utter mess that is the Robinhood platform… ick.
Once more into the fray…
Current Allocation: 0.272% (+0.136% from Trade Start)
Current Per-Coin Price: $64,382.33 (-0.99% from Trade Start)
Current Profit/Loss Status: -0.871% (*New Trade*)
I decided it was time to enter back into the trade when Bitcoin pulled back on Wednesday with a buy order that filled at $65,027.96 (after fees, of course) with a very small 0.136% allocation just to get started since we are much closer to Bitcoin’s all-time high than I’m typically comfortable with.
On Friday, Bitcoin continued to pull back and filled another buy order at $63,569.70 with another 0.136% allocation lowering my per-coin basis -0.99% from $65,027.96 down to $64,382.33.
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:
0.136% @ $60,189
0.136% @ $58,319
0.272% @ $55,517
0.272% @ $51,564
0.272% @ $48,887
0.272% @ $43,229
0.272% @ $41,559
0.882% @ $36,211
1.022% @ $32,948
2.851% @ $29,477
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 June 2021, Bitcoin crashed -56% to a low of $28,800.00.
- In November 2021, Bitcoin rallied +140% to a new all-time high of $69,000.00.
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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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.