Summing Up The Week

The markets were relatively quiet for the majority of the trading week as the two biggest news catalysts – the Consumer Price Index and big bank earnings – didn’t happen until Thursday and Friday, respectively.

In fact, the biggest news event in markets happened over in Bitcoin (check my Crypto Corner for more details), an SEC snafu followed by the ultimate approval of spot Bitcoin ETFs, however this news had no impact on the stock indexes.

Let’s look at the news that moved the (stock) markets this week..

Market News

CPI comes in slightly hot, is inflation coming back?

On Thursday, the Consumer Price Index (CPI) showed an increase of 0.3% in December, up 3.4% from a year ago, compared to Dow Jones estimates for 0.2% and 3.2%, respectively, reported CNBC.

The majority of the increase came from rising costs for shelter, which rose 0.5% in December and was responsible for more than half of the increase in core CPI. this increase was counter to what officials at the Federal Reserve were expecting, as they believed shelter would continue to decrease over time.

Pundits weren’t too concerned about the hotter-than-expected readings, however. “These are not bad numbers, but they do show that disinflation progress is still slow and unlikely to be a straight line down to 2%,” said Seema Shah, chief global strategist at Principal Asset Management. “Certainly, as long as shelter inflation remains stubbornly elevated, the Fed will keep pushing back at the idea of imminent rate cuts.”

Earnings season kicks off with the money-center banks

Earnings seasons kicked off on Friday with the major money-center banks reporting their quarters. Since JPMorgan Chase (JPM) is one of my holdings in the Investments in Play, I always watch their earnings carefully. JPM reported a fall in profit due a $2.9 billion fee it took on from rescuing regional banks in 2023, reported CNBC. However, the temporary drop in profits did not temper investors’ enthusiasm for this best-in-breed bank as it rallied after its report on Friday.

Additionally, CEO Jamie Dimon commended the American economy for remaining strong through this rate-hike cycle, “The U.S. economy continues to be resilient, with consumers still spending, and markets currently expect a soft landing, [although deficit spending and supply chain adjustments] may lead inflation to be stickier and rates to be higher than markets expect,” he said in a release.

Dimon is considered one of the most forefront and educated voices regarding the American economy, so whenever he speaks, I listen.

Next Week’s Gameplan

The big news happening this weekend is the Taiwan Presidential Election, the outcome of which could be a catalyst to China making a move… or not. Hopefully, nothing eventful comes from the election results, but should China make a move to retake Taiwan either through a direct invasion (unlikely) or nefarious subversion (the most likely outcome), any issue involving China could rollick American markets early next week.

Next week is a shortened trading week as Americans celebrate the Martin Luther King Jr. holiday on Monday. On Wednesday, we’ll get to see U.S. retail sale numbers, industrial production, and the Fed Beige Book, followed by initial jobless claims and housing starts on Thursday with some Fed Governor speak mixed in.

With the banks kicking off earnings season last week, the rest will start rolling out over the coming weeks, and it will be interesting to see if companies can live up to the sky-high expectations some analysts have for the reports.

I hope you all have a great week and I’ll see you back here next Friday, friends!

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 ETFs are FINALLY here! So, what’s next?

The Bitcoin world got turned on its Tuesday afternoon when the Securities & Exchange Commission’s (SEC) Twitter/X account was “compromised” and released a tweet stating the long-awaited Bitcoin ETFs had been approved, only to have SEC Chair Gary Gensler tweet moments later that the SEC account had been compromised, reported CNBC. Within 15 minutes, Bitcoin rallied +2.50% to nearly $48K, then flipped and sold off more than -6.50%, sending crypto investors on a rollercoaster ride of volatility.

On Wednesday, the SEC approved rule changes to allow for Bitcoin ETFs, however this news release was met with no reaction in Bitcoin’s price, likely after Tuesday’s fiasco more or less priced in the certainty of the ETF approvals. 

The Bitcoin ETFs started trading Thursday morning. If you’re interested in a breakdown of the different ones and their fees, check out this list (organized by lowest-to-highest fees following introduction periods):

Bitwise (BITB): 0.0% (after first six months: 0.2%)
ARK Invest/21Shares (ARKB): 0.0% (after first six months: 0.21%)
Fidelity Wise Origin Bitcoin Trust (FBTC): 0% (after July 31, 2024: 0.25%)
iShares Bitcoin Trust (IBIT): 0.12% (after first 12 months: 0.25%)
VanEck Bitcoin Trust (HODL): 0.25%
Franklin Bitcoin ETF (EZBC): 0.29%
WisdomTree Bitcoin Trust (BTCW): 0.0% (after first six months: 0.3%)
Invesco Galaxy Bitcoin ETF (BTCO): 0.0% (after first six months: 0.39%)
Valkyrie Bitcoin Fund (BRRR): 0.0% (after three months: 0.49%)
Hashdex Bitcoin (DEFI) 0.9%
Grayscale Bitcoin Trust (GBTC): 1.5%

Bitcoin did make a new high at $49,102.29 following the ETFs opening to trading, however the pop wasn’t as significant as many Bulls claimed we’d see. Additionally, thanks to the SEC fiasco earlier in the week, Bitcoin made a new weekly low at $43,200.00.

The Bullish Case

Bulls believe the release of the Bitcoin ETFs will see a huge influx of new cash into Bitcoin, causing the price to skyrocket. Some Bulls were predicting we’d see a “God Candle,” a single day with a price jump of $5,000-$10,000. Obviously, this did not happen as prices remained relatively muted even after the ETFs started trading.

The Bearish Case

The Bears’ predictions that ETFs were mostly priced in seem to be accurate so far. Although Bitcoin did pop over $49,000 on Thursday’s launch of the Bitcoin ETFs, that’s not the huge spike the bulls were predicting. Maybe there will be additional price appreciation over time, but, for the moment, the Bears have the upper edge with many predicting a 25% pullback in Bitcoin’s spot price in the coming days and weeks.

Bitcoin Trade Update

*Trade Reset! +7.24% in Gains, +86.86% annualized*

Current Allocation: 2.000% (Unchanged since Trade Reset)
Current Per-Coin Price: $46,590.22 (-0.01% since Trade Reset)
Current Profit/Loss Status: -2.21% (*New Trade*)

When Bitcoin took off ahead of the ETF approval deadline early in the week, I decided it was time to once again “reset my trade.” I trimmed some profits to get the allocation where I wanted it in and then locked in +7.238% in gains in about a month (I started the trade on December 5, 2023 and closed it on January 8, 2024) which works out to +86.856% if annualized throughout the course of a year.

As always, whenever I reset my trade, I withdraw the crypto and keep the profits in whichever crypto I was trading (Bitcoin, in this case, of course). This way, I maintain exposure to the underlying asset. Given how nascent the entire cryptocurrency sector is, I have no interest in locking in profits in terms of the U.S. Dollar (USD), I want actual gains. In other words, I want to continue to accrue the various cryptocurrencies I’m trading, not the fiat currency that crypto was designed to get us away from.

After trimming the position, I was left with a 2.000% allocation and a per-coin cost basis of $46,625.00, just under the high Bitcoin rallied to on Monday.

When the SEC hijinks ensued Tuesday afternoon, Bitcoin ended up triggering both buy and sell orders which resulted in a net decrease to my per-coin cost of -0.01% from $46,625.00 to $46,590.22 and left my allocation unchanged at 2.000%.

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:

0.014% @ $44,657
0.014% @ $43,587
0.014% @ $41,904
0.014% @ $41,621
0.014% @ $41,221
0.014% @ $41,090
0.014% @ $40,862
0.014% @ $40,641
0.014% @ $40,206
0.014% @ $39,723

Not Your Keys, Not Your Crypto…

In light of brokerage failures in 2022, I no longer keep any of my crypto on an exchange and I only keep enough USD on the exchanges I use to execute my next few buys. I use multiple cold wallets from the brands Ledger and Trezor to hold my crypto (click the links to access the direct sites, and I receive no affiliate benefits from these links).

Additionally, I have now divided my allocated USD between two different exchanges – Gemini and Coinbase – in case one (or both) becomes insolvent. Disclaimer: We both receive a bonus if you use either my Gemini or Coinbase referral links to open accounts.

I do not trust anyone in the space, even with Coinbase (COIN) being publicly traded (and one of my own Investments in Play positions).

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, Bitcoin crashed -54% to a low of $6430.00 in December 2019.
• In February 2020, Bitcoin rallied +64% to $10,522.51.
• In March , 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 2021, Bitcoin dropped -32% to a low of $28,732.00.
• In February, 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 , Bitcoin rallied +51% to a new all-time high of $64,896.75.
• In June , Bitcoin crashed -56% to a low of $28,800.00.
• In November, Bitcoin rallied +140% to a new all-time high of $69,000.00.
• In November 2022, Bitcoin crashed -78% to a low of $15,460.00.
• In April 2023, Bitcoin rallied +101% to a high of $31,050.00.
• In June, Bitcoin dropped -20% to a low of $24,750.00
• In July, Bitcoin rallied +29% to a high of $31,862.21.
• In September, Bitcoin dropped -22% to a low of $24,900.00.
• In January 2024, Bitcoin rallied +97% to a high of $49,102.29

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.