The collapse of the FTX exchange has been a significant catalyst for market participants to utilize one of Bitcoin's greatest value propositions -- self-custody.
Self-custody is when only you have possession of your digital funds because you control the private key. There's no question; there's no alternative to holding your crypto other than in private cold storage.
Owning your Bitcoin keys voids the necessity for a financial intermediary, completely removing any and all counterparty risk. This is especially important given that crypto exchanges hold a shaky history of being responsible stewards of clients' funds.
When you hold your crypto in hot wallets managed by intermediaries like exchanges, they have all the control. They can freeze your transactions, block withdrawals, set limits on the amount you can transact -- and, in the case of FTX, use your funds for their private self-interest.
We're seeing a massive migration where market participants are waking to the value of self-custody.
The dollar experienced significant volatility last week, posting its largest single-day loss since 2015.
As far as we’re concerned, the dollar is done. The weight of the evidence strongly suggests its best days are behind it. But that doesn’t mean it’s straight down from here for the US Dollar Index $DXY.
Instead, we expect plenty more volatility in the coming weeks and months. And when we look beneath the surface of the DXY, we’re at a logical level for the dollar to catch a breather.
Welcome back to Under the Hood, where we'll cover all the action for the week ended November 14, 2022. This report is published bi-weekly and rotated with our The Minor Leaguers.
What we do here is analyze the most popular stocks during the week and find opportunities to either join in and ride these momentum names higher, or fade the crowd and bet against them.
We use a variety of sources to generate the list of most popular names.
There are so many new data sources available that all we need to do is organize and curate them in a way that shows us exactly what we want: a list of stocks that are seeing an unusual increase in investor interest.
The broker-dealer index (XBD) has eclipsed its August high and almost back to even on the year. Relative to the S&P 500, XBD has broken out above its early 2021 peak and is now at its highest since 2008.
Why It Matters: Seeing uptrends in areas outside of just the Energy sector suggests rally participation may be expanding. This gives investors who can move beyond just the indexes more opportunities to lean into strength. But the broker/dealer group isn’t just any group. It’s typically seen as a leading indicator for the S&P 500 overall. Relative strength from this group is good for the market overall and says encouraging things about overall risk appetite.
We pride ourselves on never being dogmatic and always being open to any scenario.
What often marks a great technical analyst is the ability to choose to be objective and not letting emotion get in the way of analyzing money flow.
And we all have that choice.
We can be driven by an immediate emotional response and gather into an angry mob over the injustices of the FTX situation.
Or we can take responsibility for our own self-interest and continue to look for opportunities as they come.
It's hard not to feel like an asshole as I write this. But your only objective here is to make money. If you're a trader, you're not here for some greater good.
Now, to be clear, I in no way celebrate these misfortunes. Financial markets are brutal, and there’s nothing worse than the guy getting off on people blowing up.
But it’d be a terrible shame to walk away from this institutional crypto contagion without taking some lessons.
We’re all human beings.
None of us is infallible.
Markets like these remind us of the importance of risk management, which is so easily forgotten in the good times.
