Panic At The Crypto
Friday January 28, 2022 - Issue # 3
Holy crap man. You’d think after doing the same thing everyday for over 4 years that a guy could recognize a pattern. I mean, calling a top or the top is reserved for a very select few in the investing world (or a wider selection of “spray and pray” accounts on Twitter) - it’s not meant to be easy - but man, there were a few signs that I should’ve paid more attention to.
Look, I’m not saying that the party is over. I’m also not saying that I’m now “thinking in fiat terms” because I wasn’t planning on selling my coins anyway. However, I had (have) a few BTC/crypto proxy securities that I held in my TFSA that essentially mirrored the direction of the market but with a steroidal kick to the upside, and quite obviously, the downside. Oh how sweet it would’ve been to take advantage of the best financial product in Canada (perhaps the best thing left that Canada has to offer?) and dump some of these things at a 1000%+ gain to maybe, I don’t know…buy some more coins for cold storage? Buy a dramatically overpriced house? But I digress, I’ll have to wait for next time - is what I said the last 2 times.
My point is not to make you feel bad that I’m not yet a homeowner, or to gloat about 10x’ing my registered accounts. It’s to show you that even someone who has been working a crypto trading desk for over 4 years is totally susceptible to letting greed (I think that’s what it is) get in the way of a good plan. I’ll be fine.
For the folks with a responsible portfolio allocation to BTC, maybe some ETH, and hopefully not a whole lot else in crypto, these moves should be looked at as an amazing opportunity to stack more coin!
See, Michael Saylor doesn’t let short term price action shake his focus!
What we saw at the desk
This week has been relatively slow as our clients have been patiently waiting for a breakout in either direction. Last week was the opposite - which is why I wasn’t able to get my weekly letter out - it was incredibly busy.
Sell side volume has crushed buy side volume by a wide margin on aggregate, in the last two weeks combined. However, the sheer number of trades was heavily tilted toward the buy side during the same period of time.
The reason sell side volume was so high relative to the buy side seemed to be because clients who have been in the space for a while (large holders) were spooked from the price action ahead of the FOMC meeting this week and were hedging their positions or going completely into cash. The idea was that if the Fed surprised to the downside they would be in a position to buy back in at lower prices, and if the market positively reacted to the Fed’s announcement, they were prepared to pay a premium for certainty on a breakout to the upside. Our trading team had their fingers on the trigger for the Wednesday announcement which turned out to be a non-event…shocking.
A bullish takeaway from the latter part of this month has been the number of new clients we’ve onboarded. Even with all the uncertainty across all markets really, we’re seeing an interestingly high amount of interest from net new entrants to the space. This was the main contributor to the large number of buy orders we saw across the desk since the beginning of last week.
FOMC, plain vanilla announcement.
The announcement from Fed Chair Powell at the FOMC meeting this Wednesday was essentially a bunch of nothing. I mean, he did say a lot of words...
In short, it’s a wait and see what happens in March with investors expecting a 25 basis point interest rate hike.
The only point that stood out to me was that the Fed affirmed that it will take a passive approach to balance sheet reduction, which is meaningful as one of the catalysts for the crypto selloff in January had been around tightening. Powell said that they will “have a couple more meetings to talk about allowing the balance sheet to begin to run off and do so in a predictable manner.” To me this indicates that quantitative tightening is most likely going to happen later than previously expected.
In case you missed it…
IMF urges El Salvador to drop Bitcoin as reserve currency
https://www.reuters.com/article/imf-el-salvador-idUSL1N2U522P
Change in narrative: Texas Governor eyes Bitcoin mining to fortify the grid
https://www.bloomberg.com/news/articles/2022-01-27/texas-governor-eyes-bitcoin-mining-to-fortify-the-electric-gridBiden Admin to regulate Bitcoin as a matter of National Security
Russia stepping back on crypto ban
https://www.thestreet.com/crypto/bitcoin/vladimir-putin-russia-boasts-competitive-advantages-in-bitcoin-miningUpdate from the Bitcoin Mining Council
https://bitcoinminingcouncil.com/wp-content/uploads/2022/01/2022.01.18-BMC-Q4-2021.pdfFormer Goldman Sachs CEO: Crypto is happening
https://news.bitcoin.com/goldman-sachs-blankfein-view-on-cryptocurrency-is-evolving-crypto-is-happening/Lebron and his Foundation sign deal with crypto.com to spread awareness