Happy New Year? Yeah, Happy New Year!
Saturday January 8th, 2022 - Issue # 1
Firstly, you might’ve noticed that this newsletter looks a little bit different than the ones that have hit your inbox weekly for the last year and a bit. I decided to move over to Substack as it is much easier to navigate (meaning you might hear from me a little more this year) and I don’t have to double my efforts on Medium where I was posting for social networks. If you have any feedback for me, please don’t be shy to send me a note!
Happy New Year and hope you all had a great time with family and friends over the holidays - we deserved it after a monumental year of “up only.” Well, it wasn’t exactly up only. We tend (or maybe it’s just me) to think of the year as a whole instead of breaking things down… the move from 20k to 69k over 2021 was anything but a smooth ride. Despite what the genius traders on CT are saying - if you didn’t take some chips off in the 60’s, you haven’t screwed up this bull market.
You shrugged off Elon Musk suspending vehicle purchases using BTC in May as he expressed his serious concerns over bitcoin’s carbon footprint. You battled back with your wallet while the ESG thumpers in big government and banking excitedly got behind Elon and hopped on the FUD train to try to take us down.
You diamond handed it through the real China ban in July where overnight, over 50% of the hashrate – the collective computing power of miners worldwide – had dropped off the network.
You took it on the chin when the US slipped in a “backdoor kill switch” - the Crypto Provision - to the Infrastructure Bill. Instead of laying down you banded together with the rest of the community and melted the phones of your respective Senators to voice your dismay (I actually know Canadians that did this, lol respect).
Suffice it to say, and as the chart below shows, it was not an easy year to be a hodler.
You were made for this.
Yeah, but the Fed…
Recently, the Fed tossed out the word “transitory” when it refers to inflation and they’ve signaled that they think it’s time to tame CPI numbers. They said that they will discontinue their purchasing of bonds by March of this year and look to make the first rate hike sometime between March and June.
Sorry kids, Santa is not real. Neither is the belief that the Fed and the government are separate. Most investors believe that the Dem’s last crack at surviving a total embarrassment in the November elections is to show that they’re tough on inflation. They will instruct the Fed to raise interest rates, and the Fed will follow suit.
The money printer no longer going “Brrrrr” and the Fed hiking interest rates is a deadly concoction for risk assets.
However, if the Fed raises rates and we see the S&P react by trading down something like 20%+ from it’s all time high (which it reached already in 2022) history suggests that they will swiftly change course. Queue a rate slashing and the warming up of the money printer.
Short term, we could be in for some pain or maybe just some boring sideways action with some intermittent swings (which honestly, we’ve seen since last May) while we wait to see how things shake out. Medium to long-term, the Fed has backed themselves into a corner - permanently - where they have no choice other than to be stimulative and easy.
Notes from Satstreet’s Director of Trading, Dan Wright.
The theme of the week and New Year so far is risk-off.
The results on the week so far - safe haven currencies like the USD and Japanese Yen are up, S&P 500 and Nasdaq down, and Gold down more than 2%. Crypto followed suit in the risk-off environment with most pairs down bigly on the week.
We were at a breakeven ratio of buyers and sellers on the desk as buyers came in after the drop. BTC/USD and ETH/USD broke through their upward channel trends. Volumes and liquidity are still very low as traders are coming back from holidays and adjusting to new measures and lockdowns from governments around the world on the Covid variant.
In case you missed it…
El Salvador President Nayib Bukele predicts two more countries will make Bitcoin legal tender https://www.zerohedge.com/crypto/el-salvador-president-nayib-bukele-predicts-two-more-countries-will-make-bitcoin-legal
BTCS becomes first ever Nasdaq listed company to pay a “Bividend” https://finance.yahoo.com/news/btcs-first-ever-nasdaq-listed-133100447.html
Ray Dalio recommends a 2% allocation to Bitcoin https://www.cnbc.com/2022/01/05/ray-dalio-allocating-2percent-of-portfolio-to-bitcoin-is-reasonable.html
Customer accounts frozen on Hong Kong Exchange Coinsuper https://markets.businessinsider.com/news/currencies/coinsuper-hong-kong-crypto-exchange-clients-funds-frozen-cryptocurrency-2022-1