Summing Up The Week

The first half of the week was made up of market indecision as it seemed like everyone was waiting to see what the Federal Reserve would do when it came to hiking interest rates during their Wednesday meeting.

The markets seemed to stabilize on Thursday, but that ended up being a bull trap as the market really collapsed on Friday when the reality of the financial tsunami coming our way really hit home.

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

Market News

Fed hikes interest rates +0.75%, market.. POPS?? …then drops

Although it should have come as no surprise to anyone, the markets still reacted when Federal Reserve Chair Jerome Powell announced the central bank would raise the benchmark rate by another +0.75% at Wednesday’s meeting, reported CNBC. Despite an 80% chance of a 0.75% hike (and not a 1.00% hike), the stock market actually initially rose substantially following the Fed’s announcement, despite the additional hawkish overtones provided by Powell’s statement.

In his press conference, Powell went on to tell investors that the Fed intends to continue raising the rates much higher than even current levels in its ongoing fight against inflation. The prepared statement released by the Fed described current job gains as “robust” and also pointed out that “inflation remains elevated,” stating that “ongoing increases in the target rate will be appropriate.”

Later in the day, traders seem to have finally heard what Powell was saying and the market completely rolled over, losing all of its previous gains and then some as stocks sold off into the close of trading.

Congress grills seven Big Banks in oversight testimony

On Wednesday and Thursday, CEOs of the seven biggest U.S. banks, including JPMorgan Chase (JPM) and Citigroup (C), testified before Congress,  reported CNBC.

On Wednesday, the banks presented before the House Financial Services Committee, discussing everything from the U.S. economy to how Bitcoin and cryptocurrencies are nothing more than “Decentralized Ponzi Schemes” in the words of JPM CEO Jamie Dimon.

On Thursday, the Senate Committee on Banking, Housing, and Urban Affairs focused on industry oversight and the potential the banks could cause another crisis similar to what the U.S. endured during the housing crisis of 2008-2009 which caused the Great Recession.

Naturally, we’d all like to avoid that from happening again, please.

Next Week’s Gameplan

Despite the Fed being out of the picture for at least a little while, we’re still in the thick of the worst seasonal time of the year for stocks. Accordingly, my plan remains eyeing my positions for when I might be able to add to them, not looking for places to reduce my sizing, as the market volatility will likely continue to remain bearish.

Although still a while off, many analysts expect that the markets will actually rally into the year’s end thanks to the midterm elections. It might sound counterintuitive that the unknown of an election can be a positive catalyst, markets typically rally after all elections as they settle the “known unknown” of who will be elected.

Midterms that result in a gridlocked government are particularly positive for the stock market – there’s nothing stocks like more than a government that can’t shake anything up as very little market-moving legislation can be passed by a split government, which is likely going to be what we’ll have as most pundits believe the Democrats will lose the majority in Congress as a result of this year’s election.

In the meantime, I’ll see you here back here next Friday!

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 remains directly correlated with risk-assets…

This week, Bitcoin showed no signs of separating itself from the rest of high-risk growth assets like technology stocks, selling off in dramatic fashion following some positively suspicious price action after the Fed’s interest rate hike announcement.

Within 15 minutes, Bitcoin traded nearly 7% from its high to its low. This is nearly unheard of price action in pretty much any asset class… unheard of, that is, unless there’s price manipulation going on. Yet another reason the space desperately needs regulation and increased transparency in the markets, at least.

Bitcoin’s selloff broke our previous weekly low and the monthly low at $18,527.00, not finding support until $18,153.13. If that support breaks, the next level is the 2022 bottom down at $17,567.45. 

Given that traders love causing crazy price action when the rest of the financial markets are closed and on weekends, I expect the next few days to be particularly exciting for everything crypto.

The Bullish Case

Once again, the Bulls still point to “green shoots” like Nasdaq developing a Digital Platform for cryptocurrency custody as the reason why Bitcoin will not break its 2022 lows. Many Bulls in crypto are so new that they didn’t live through the 2018 Crypto Winter where news story after news story portended the potential of crypto, even while Bitcoin sold off more than -84% from its 2017 high to its eventual 2018 low.

The Bearish Case

Bears will remain in control for as long as the macroeconomic environment remains grim, and, at least for the foreseeable future, that will be quite some time.

Additionally, during his presentation to Congress, JP Morgan’s CEO, Jamie Dimon, once again railed against cryptocurrency, calling them “Decentralized Ponzi Schemes” and saying “the notion this is good for anybody is unbelievable.” Dimon has long been a skeptic of Bitcoin and crypto, however that doesn’t make his rhetoric any less potent.

There are no positive catalysts on the space for any risk asset which means Bitcoin and crypto will continue to remain under pressure, with the potential break of 2022’s lows a very significant possibility sometime in the near future.

Bitcoin Trade Update

Current Allocation: 16.282% (+0.256% since last update)
Current Per-Coin Price: $23,556.39 (-0.422% since last update)
Current Profit/Loss Status: -20.693% (-2.898% since last update)

I added to my position with a small buys when Bitcoin dropped through $19K once more with my first order filling at $18,774.90 and my lowest order filling at $18,360.90, giving me an average buying price of $18,640.23 (after trading fees).

The combined buys lowered my per-coin cost -0.422% from $23,656.22 to $23,556.39 and raised my allocation +0.256% from 16.026% to 16.282%.

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:

0.140% @ $18,182
0.140% @ $17,685
0.140% @ $17,319
0.140% @ $17,105
0.280% @ $16,574
0.280% @ $16,374
0.560% @ $15,408
0.560% @ $14,890
0.981% @ $13,317
1.401% @ $12,648

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.
• In August 2022, Bitcoin rallied +44% to a high of $25,214.57.
• In September 2022, Bitcoin dropped -28% to a low of $18,153.13.

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.