Summing Up The Week
The market bounced off last week’s lows but remained relatively flat throughout the past shortened holiday week. While some analysts claim that the market could see a rally of as much as 6-10% from last week’s bottom, others are calling the market movement a “relief rally” as the sellers build up strength for the next push down.
The result? Relatively dull price action.
Let’s take a look at the news that moved (or didn’t move) the markets this week…
Market News
The Fed is “strongly committed” to bringing down inflation
On Wednesday, Federal Reserve Chairman Jerome Powell told Congress that the central bank is “strongly committed” to bringing down inflation, reported CNBC.
“At the Fed, we understand the hardship high inflation is causing. We are strongly committed to bringing inflation back down, and we are moving expeditiously to do so,” the Fed chief said in remarks for the Senate Banking Committee. “We have both the tools we need and the resolve it will take to restore price stability on behalf of American families and businesses.”
Although Powell’s comments are promising in the ongoing fight against inflation, it’s worth noting that inflation is raging out of control as of last week’s CPI report. While the Fed is taking some action, many economists believe the Fed isn’t being hawkish enough as it continues to take a measured approach to raising interest rates.
Of course, there are nearly as many economists on the other side of the argument who believe that the Fed is raising interest rates as the U.S. economy weakens, which has brought disastrous results including recessions and even The Great Depression, historically.
Zero Trading Fees to return to Bitcoin??
On Wednesday, Binance.US announced it would allow users to make spot Bitcoin trades without paying trading fees, reported CNBC. This change could force competitors like Coinbase (COIN) and Gemini to also eliminate trading fees, currently 0.60% for market orders and 0.40% for limit orders on Coinbase and 0.40% for market orders and 0.20% for limit orders on Gemini.
Naturally, CNBC presented Binance.US’s elimination of trading fees as a result of Robinhood, however, long-term readers of my blog (and long-time crypto traders) will remember that prior to 2018, there were zero trading fees on limit orders on Coinbase Pro and Gemini ActiveTrader.
Trading fees are actually relatively new to Bitcoin trading, and their elimination, while welcome, is a return to the way things were, not something revelatory.
Regardless, the elimination of trading fees will present a problem for Coinbase and Gemini as both brokers have enjoyed increased revenue streams over the recent years as a result of charging traders for services that were previously free.
Perhaps, Binance.US’s move will make a welcome return to the way things should be, seeing as how stock brokerages eliminated fees at pretty much the same time Coinbase and Gemini introduced them nearly four years ago.
All banks pass the Fed’s 2022 Stress Tests
On Thursday, the Federal Reserve announced that all 33 of the major banks it tests each year with its “Stress Tests” passed the tests, reported CNBC. The Stress Tests, a series of different extreme scenarios of economic variables put forth to test a bank’s resilience in a downturn, were developed following the 2018 Great Financial Crisis where many of the major banks nearly became insolvent and went under.
Supporters of the tests believe the extreme scenarios should prevent another crisis in the future. This year’s test included a number of extreme situations including 10% unemployment, a decrease in the stock market in excess of 55%, and several other issues. Critics point out that no one anticipated the scenario in 2008 and the likelihood that the next crisis will include variables we could predict is very low.
For me, it’s a more of “well, it’s better than nothing” approach. What’s the alternative? We can either try to prepare our banks for potential negative outcomes or do nothing at all. I’d rather do something.
Next Week’s Gameplan
Shortened weeks are often dull and this one was no exception, however, we’re still in the historically volatile summer season, so anything could happen in the coming weeks. In order to prepare, use the price levels set in last week’s selloff to help determine your gameplan going forward.
And, as always, remember to have a plan for both directions – what will you do if the market goes up and what will you do if the market goes down?
Have a great week, everyone!
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
Important Disclaimer
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.
Bitcoin Price (in USD)
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Weekly Change
Bitcoin Price Action
Everyone’s asking: “Has Bitcoin bottomed?”
After last week’s disastrous crash to $20,000, the Bears were far from finished, pushing Bitcoin down even further over the holiday weekend before the crypto found support at $17,567.45. Bitcoin ended up bouncing up and over the Next Support Last Resort (?) trendline, but given how weakly it held previously, can it truly provide the support Bitcoin needs from here?
The move shocked the Bulls as a key characteristic of past Crypto Winters is that Bitcoin has never sold off below the high of the penultimate bull market… until now. With 2018’s high right at $20,000, Bulls believed that key level would provide support… it did not.
However, Bitcoin didn’t just break that key level by a little bit, it lost more than -12% beneath the instrumental $20K support level – down to $17,567.45. Bitcoin did proceed to bounce following that low, creating a new weekly high at $21,711.00 which has left all participants in the space wondering: is Bitcoin’s bottom in??
In short, I say “no,” but let’s look at the Bull and Bear cases to learn why.
The Bullish Case
Bulls claim that the bottom is in and that now is the best time to buy as Bitcoin is warming up for a new bull rally to an all-time high. Michael Saylor, CEO of MicroStrategy (MSTR), seems like he’s everywhere with interviews on CNBC, Fox News, YouTube… everywhere. And, Saylor claims this is it, it’s time to get on the Bitcoin bandwagon and ride it into a stable financial future.
The Bearish Case
Bears point out that no Crypto Winter in the past has ever bottomed like this, and, unfortunately for long-term HODLers like myself, they are 100% right.
Crypto Winters (long periods of bearish price action in the cryptocurrency space) typically last 12-18 months and see huge bear market rallies where Bitcoin can rally as much as +100% and still be in a bear market. Even if you believe this Winter started after Bitcoin hit its recent $69K all-time high in November 2021, that means we’re only seven (7) months in and still have some time left before we can be certain a bottom is set.
The best approach to take is extreme caution. I have a position on, but I don’t have nearly a full allocation and I won’t add to it in big quantities unless we see lower-lows. If this really is the bottom, so be it, but I’d rather have a small position that’s incredibly profitable rather than be all-in and have no money to put to work if we see (much) lower prices.
Bitcoin Trade Update
Current Allocation: 15.938% (+0.625% since last update)
Current Per-Coin Price: $23,811.74 (-1.057% since last update)
Current Profit/Loss Status: -10.687% (+3.725% since last update)
My Bitcoin buying continued this week starting in the early hours of Saturday morning with a positively tiny buy at $20,113.50 followed by larger and larger buys on the way down to my last buy this round at $18,188.40.
The combined orders gave me an average buying price of $18,996.31 (after fees) and lowered my per-coin cost -1.057% from $24,066.09 to $23,811.74. My allocation size has increased +0.625% since last week, going from 15.313% to 15.938%.
The reason my quantities were larger above $20,000 than they are below $20,000 is completely due to key levels of support. For example, $20K was significant. Now that Bitcoin’s broken $20K, the next key level is $14K, followed by $10.5K-11K, and so on.
I make bigger quantity buys at key levels as there is a higher likelihood of those levels being the bottom. However, once those key levels are broken, there is a higher likelihood of Bitcoin selling off even further to the next key level of support, so my buying quantities return to smaller sizes after a key level of support has been broken.
Should Bitcoin break below $10K, my buying targets remain aimed at key levels, but the quantities increase by a corresponding amount to maintain my per-coin price at a level no more than down -50% from that specific buy target (it’s wonky, I know).
Currently, I remain extremely cautious in the space as I believe there are many key targets the Bears are salivating over. One level, in particular, is down at $14,000 where a major player in the space, Celsius Network, could potentially need to liquidate hundreds of millions of dollars in Bitcoin to repay loans it took out on margin, resulting in even more downside for Bitcoin during this Crypto Winter.
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:
0.358% @ $19,072
0.853% @ $17,705
1.279% @ $16,457
1.705% @ $15,056
2.131% @ $14,242
3.836% @ $11,972
5.968% @ $10,674
4.263% @ $9,363
4.263% @ $7,859
17.02% @ $5,058
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 (possible moves include drops of -90% or more and gains of +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.
- In December 2019, Bitcoin crashed -54% to a low of $6430.00 in December 2019.
- In February 2020, Bitcoin rallied +64% to $10,522.51.
- 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 April 2021, Bitcoin rallied +51% 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.
- In June 2022, Bitcoin crashed -75% to a low of $17,567.45.
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.
