This is the video recording of our January 13, 2023, All Star Charts Crypto Weekly Strategy Session.
The Peril of Comforting Narratives
From the Desk of Louis Sykes
Every child loves a bedtime story.
These stories allow their mind to wander from busy thoughts into an adventure. It provides a comforting reality and a narrative they can consciously control.
Comically, in this sense, children and investors are more similar than we let on.
It’s just that one obtains comfort from an adventurous tale while the other derives solace in news headlines.
Don’t get me wrong, I’m not saying this is bad or wrong. I’m just noting its existence.
The vast majority of investors need to understand why a stock is moving rather than solely following technicals and money flow.
I totally get it.
Bear Market Headlines
You seeing this?
Riot Blockchain $RIOT is rebranding to Riot Platforms “amid a bleak outlook for the crypto industry.”
You can’t make this up.
Only after the stock has stumbled into a 96% drawdown do they change the name of the company.
Some Context for This Rally
There’s no denying many alts have posted sizeable gains over the last week.
But the fact remains that the appropriate conditions have yet to align for us to flip the book long.
Perhaps the best example of this is the recent move in Gala $GALA.
Altcoins Gather Momentum
Over the last week, we’ve seen momentum flow down the cap scale in crypto markets. Many altcoins have posted sizeable gains coming from historically skewed levels.
This is happening in the context of a tightening volatility regime, where price stability in Bitcoin, Ethereum, and most alts were at some of the highest levels in recent history.
The Headwind for Crypto
We’ve said it time and time again.
It’s all about the US dollar!
When did the NYSE new highs list peak? When the dollar bottomed…
When did equities bottom? When the dollar rolled over…
It’s not rocket science.
I don’t care why it’s the case because the correlations are so evident. It’s a fundamental reality in this tape: A weak dollar is positive for stocks and crypto, while a strong dollar pressures those assets.
Now, consider: What have been the defensive assets in this market?
The Japanese yen? Nope.
Gold? Not until recently.
Bonds? Hell no.
Whenever shit’s hit the fan, that money has flowed into the US dollar.
It ain’t rocket science, folks.
Giving Saylor the Benefit of the Doubt
Make no mistake: Volatility is around the corner.
While price action is trending in nature, volatility mean-reverts. Periods of low volatility precede volatility expansions and vice versa.
So, where do we find ourselves today?
Bitcoin’s price stability is at its third-highest level in the last five years.
Have you noticed?
Crypto volatility has completely died off. You’d probably get more juice trading the equity indices than shitcoins these days.
These extremes in volatility — or lack thereof — don’t last long.
So, we’re placing a high likelihood that Bitcoin will make a decisive move in the coming weeks.
And how are we looking to profit from this upcoming move?
Well That’s a First…
What a year, eh?
The S&P 500 posted its worst return since 2008!
I think it’s fair to say that if your portfolio survived 2022, you’re doing a great job.
You even outperformed most funds and equity managers. Just think how well you can do in a more favorable environment.
To that point, just because it was a bad year for markets doesn’t mean it had to be a bad year for YOU.
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