I Don’t Know Why I Talk About Crypto in a Public Setting

0 for 2.  That’s my hit rate in publicly forecasting bitcoin price action.  Crash & burn.

Can’t get everything right.  That’s trading.  You just have to manage risk within your directional bias regardless of the asset class.

If you read my piece from mid-July on BTC, then hard and major props to Katie Stockton and her team at Fairlead Strategies.  They literally bottom-ticked the bitcoin price.

BTC Weekly (8-30-2021)

Although from a short-term standpoint I’ve made a couple of idiotic calls on BTC, I firmly believe in the long-term potential of blockchain technologies’ disruption.

“Metaverse” is being bandied about lately as if the Oasis will be online by Christmas, but that is a major, major area where blockchain tech has the potential to install itself at the heart of a new-ish digital economy.

And if so, then early on it appears Ethereum may be the killer app.  Too early in the game to tell, but ETH looks like the stallion to bet on based on wide usage as the foundation for so many trust-applications.  It’s not about investing in a “currency” to replace the USD.  It’s about investing in the future of commerce.

Or at least that appears to be the path.  Why else would the largest of largest Silicon Valley angel veterans be investing in the space?  They don’t appear to be worried about contributions to the “enabling” of cybercrime empires.

To crypto nubes, maybe this enlightening.  To crypto vets, this is all old news.

Now let me take another shot at a crypto price projection and see if I can’t get my batting average up to .333.  Worse case, my commentary can be readily identified as anti-correlated to BTC & ETH price action and I go 0 for 3.

TradeSmith has a timing service for assisting with forecasting various asset classes.  The premise of the service is that everything follows a cycle.  Everything.  And once a cycle is recognized then TradeSmith’s software can make a best guess on future price action.

Below is a chart of the Grayscale Ethereum ETN (ETHE) using that forecasting tool.  It’s not about amplitude; just general direction.  The composite forecast line (purple) shows an interesting set-up for the ETN.  Observe the green lines denoting the upward advance within the last 2 cycles.

ETHE Timing (Aug. 2021)

Are we on the verge of another possible run upwards in Ethereum?  Current action and sentiment sure seem to be lending themselves to the notion.

After recently commenting on Mark Zuckerberg and Jack Dorsey to Bloomberg, Vitalik Buterin’s shared a vision for ETH:

And he continues to have big plans for the Ethereum network. When asked where he sees it in five to 10 years, Buterin replied, “hopefully running the metaverse.”

Bitcoin – A Quick Technical Read

So the last time, I tried to seriously interpret BTC action in a public setting was 2017.  Right before BTC decided to offer speculators a nifty little 10x return in less than a year.  And I was not on the right side of that 10x.

Like many, I’ve significantly increased my education in the blockchain.  I see and agree with the future of the potential.  Not necessarily in agreement with the anarcho techno-extremists, but clearly an enormous amount of innovation in the space is going to go mainstream in the coming years.  It’s like Pandora’s Box.  Can’t be closed again.

Because of it’s ability to attract those looking for an easy score coupled with everyone being a “Market Wizard” thanks to the internet (including A-holes like me), some action appears to be setting up in BTC.  Observe.

BTC Weekly (7-16-2021)

Or maybe it’s a “vomiting camel.”  Look at the most current weekly candle on the right of the chart.  See how it’s breaking down through the shoulder-line.  I suspect that cheap bit of technical analysis will cause a relatively quick descent into the $20k area; anywhere between $21k and $29k.

This will be the result of whales and algos drawing in the suckers, who arrived to the party far too late, to puke.  I hypothesize, with zero quantitative support, that the $20k-ish price range in the gold oval above will draw in big money establishing a floor for the next move in BTC.

And I believe these moves will be hard and fast.  A consolidation could then occur allowing time for new positioning, but I don’t think BTC goes sub-$20k.

This will in turn cause a selloff in all crypto-assets.  And I think Ethereum could get sold off all the way down to $1200 but probably find strong support at $1400.  Institutional support for the future of smart-contract based applications may set the floor at that $1200 to $1400 range in ETH.

Headlines from a few days ago like the following help to anecdotally support the thesis.

Coindesk Lead AM Article (7-13-2021)

That bullish analyst quoted in the article was Kate Stockton of Fairlead Strategies.  Have a read of her bio.  About as accomplished as you can get for being a chartist.

Katie Stocktcon - Fairlead Strategies

I can only trade my beliefs about the markets within the edge that I’ve cultivated.  I don’t see a bullish breakout yet.  I see a falsely bearish breakdown, consolidation, and the beginning of the next leg of the advance.  Handicapping future outcomes ain’t easy and trading imaginary patterns is typically a fast way to Lossville, so the price action is always the final arbiter.

Diamond hands and laser eyes aside, if you got some play-money then a better buying opportunity may well be on its way in cryptos.

Beware the Secular Trend’s Potential Short-term Counter Move

Right now the markets are at extremes.  Essentially all of them.  Current price action across a broad swath of sectors and assets classes strongly reminds me of the end of 2019 and beginning of 2020.

My gut tells me that a fear-event is near.  And my gut is being primarily led by current action in the US dollar.  Short positioning in the buck is extraordinary.

Record Short USD Positioning (Dec. 2020)

Yeah, yeah, macro-top-down, commodity bull, central bank largesse, and all that in regards to the USD but this is egregiously exaggerated.  Not that it can’t get more extreme, but consider the following charts.

Seasonality, courtesy of SentimenTrader, tends to be pretty strong in January for the buck.

USD Seasonality - ST (Dec. 2020)

With currencies, large fast moves in a short period are atypical but we live in a time of atypical.  Pairs always have to be acknowledged and the anti-correlation to the euro is at a bit of an extreme.  In the last decade, every time the Euro to USD line (white-monthly) has approached 2 standard deviations above the 25-month MA, then it’s been go-time for a USD rally (green).

Euro vs USD (Dec. 2020)

Does this mean a reversal is imminent?  Nope.  Does it mean additional portfolio hedging here is warranted?  I’d say it’s a prudent use of capital.

The long-term case for the dollar’s demise is well documented.  Goldbugs have been the longstanding voice of fiat destruction, but more recently, Ray Dalio has picked up the baton.  Sam Zell has now officially thrown his name in the dollar-destruction ring with this recent quip.

The single greatest risk that we are dealing with today is the loss of the U.S. dollar as the reserve currency.  If we keep doing what we are doing right now, I think it is 10 or 15 years away.

These investment legends are right.  The USD will in all probability lose 30% to 40% of its reserve status this decade.  And world markets as well as geopolitics will be volatile as a result.

Why do you think Bitcoin has jumped so hard?  That’s institutional fear of central banking monetary policy, not retail FOMO driving Bitcoin.  It’s palpable, but it’s ahead of itself in the USD and Bitcoin.

Nothing moves in a straight line and short-term counter spikes in any trend are as sure as sunrise.  I’m not implying that a fear-event has to rival Covid’s March spikes or we’re at a long-term top in equities.  Just saying that a short-term move to remove some excess is worth hedging at this point.

Bitcoined to Death

September 2nd, 2017 Update:  Depending on when you read this for the first time, how ignorant do I sound as of today with Bitcoin having doubled from the original publishing date of this article?  Not to mention, all the other ICOs since then that are minting millionaires.  My knowledge and experience say this is one of the ultimate bubbles in history.  My brain and heart tell me to make hay while the sun shines.  My ego just calls me an asshole for continuing to miss out.

Have you had enough of Bitcoin and the awe-inspiring wonder of all things blockchain yet?  The blockchain not only cures cancer and AIDS but can make you fly…like Superman.  That’s the hyperbole surrounding cryptos.

“If only I’d just bought 10 bitcoins in 2009!”  Boo hoo.  So you didn’t get rich on Bitcoin.  You probably didn’t get rich on real estate in 2005 or tech stocks in 1999.  The investment world keeps turning.

Never invested in Bitcoin or Ethereum for that matter.  Maybe that makes my opinion irrelevant.

I have read a lot about cryptocurrencies though, specifically Bitcoin.  I missed that train along with the majority of people in the world.  I just can’t wrap my mind around something that isn’t universally accepted that has to be traded on potentially questionable exchanges where competing investments keep cropping up to defeat and dilute the entire concept of the limited-money.  Maybe I just don’t get it.

I do know that blockchain technology will stand the test of time.  The current crypto brands?  I’m not so sure.

My prediction, some sort of scandal or several will avail themselves quite soon causing a sell-off in Bitcoin.  It doesn’t matter whether it’s serious account-hacking somehow or exchange scams, because this sort of pricing will bring out the most intelligent criminals in the world.  And this latest maniacal move up will be entirely erased.  Hope I’m wrong.  Honestly.

Bitcoin YChart (5-28-2017)

Ever ridden the The Dragster at Cedar Point?  Bitcoin owners may be about to experience their own thrill-ride.

                      The Dragster - Cedar Point

If you haven’t hopped on the crypto-train yet and you feel the need to invest in one of the “currencies” in the current price environment, then by all means, indulge.  But consider having a read of these two articles.  One shares the opinion of an experienced player, the other about just one illicit way in which to have your profits harvested from you.

1. http://themacrotourist.com//macro/my-great-bitcoin-bungle

2. https://www.forbes.com/sites/laurashin/2016/12/20/hackers-have-stolen-millions-of-dollars-in-bitcoin-using-only-phone-numbers/#38bad65438ba

To current owners, I wish you well.