Our process is defined by the power of simplicity.
We don't need a complicated macro thesis to position ourselves appropriately in crypto markets. We find our edge in stepping back and identifying inflection points where we want to define our risk.
Risk should be front and center, considering recent events.
One of the takeaways from this entire FTX/Alameda mess is the necessity of risk management. Sam Bankman-Fried lost an empire in the space of a week.
If this isn't a great reminder to manage risk and position size accordingly, I don't know what it is...
A hilarious video made the rounds on Twitter showing Caroline Ellison, the 28-year-old CEO of Alameda Research, arguing against the use of stop losses.
This is the most chaotic turn of events I've experienced being involved with crypto. For those who somehow missed what's happening, here are the brief details...
One of the largest crypto exchanges on the planet, FTX, has experienced a significant liquidity crunch. As a result, Binance has entered into a non-binding agreement to acquire FTX, helping to cover the liquidity crunch.
Any and all funds held on FTX are now gone.
It's the biggest blow-up in the industry's history.
It's nearly impossible to switch off when you're invested in crypto.
I'm a little jealous of those solely involved with legacy markets; it must be nice to have an off-switch. In this part of the financial world, there's always something happening.
And my passion for the space often makes it difficult for me to let go.
But, last weekend, my hand -- indeed, my whole body -- was forced. A night in the ER and a few days bedridden with a gnarly viral infection overwhelmed my ardor for fake internet coins.
Happy to report I'm recovering. And here's me after I stumbled to my computer to catch up on the action:
Dogecoin and other meme coins are seeing a boom off the back of Elon Musk's takeover of Twitter.
It isn't isolated to the Doge. A slew of meme coins have been born since Elon tweeted an image of a Shiba Inu dog wearing a Twitter t-shirt for Halloween.
It's hilarious that his tweets never fail to pump these things.
As technicians, we pride ourselves on never being dogmatic in our approach. If new data that invalidates our initial thesis presents itself, we're always willing to flip our approach.
Yesterday, we wrote that Ethereum testing a significant support zone suggests this rally is mean-reverting in nature. In that same breath, though, we noted that it's wise to treat every chart on its own merits.
If you adopt an overly broad picture of markets, you'll often miss some of the most straightforward trading opportunities.
With all that said, a few names are shaping up nicely in this tape.
Mean reversion is a universal element of the world we live in.
Reversion to the mean is a statistical phenomenon stating that the greater the deviation of a variable from its mean, the greater the probability that the next measured variation will deviate less.
In other words, an extreme event is likely to be followed by a less extreme event.
In financial markets, mean reversion is everywhere. This is especially the case in bear markets when prices dramatically rally following prolonged periods of sustained weakness.
As John Roque, one of the GOATs of technical analysis, would say, "We’re not in a reversion to the mean business. This is instead a reversion beyond the mean business."
Specifically, asset prices retracing to their statistical average isn't the rule, it's the exception. Rather, in most cases, asset prices will often overshoot their "averages."
With crypto markets bouncing over the last week, it raises the question, is this just yet another mean reversion rally, or does this move have some legs?
